Reference no: EM132772472

Question - On January 1, 2006, Pencil Company granted Mr. Mongol Staedtler Rotring, its president, 5,000 stock appreciation rights for future services to be rendered. The rights are exercisable and expire three years thereafter beginning December 31, 2007. On exercise, Rotring is entitled to receive cash for the excess of the market value of the stock on the exercise date over the market value on the grant date. Rotring exercised all of the rights on December 31, 2007. The per share market prices of Pencil's stock were as follows:

January 1, 2006 25

December 31, 2006 30

December 31, 2007 40

As a result of the stock rights, how much should Pencil recognize as compensation expense in 2007?

a. 62,500

b. 66,200

c. 68,500

d. 73,500

e. 73,200