What amount should be reported as compensation expense

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Reference no: EM131105385

In connection with a stock option plan for the benefit of key employees, Ward Corp. intends to distribute treasury shares when the options are exercised. These shares were bought in 2010 at $42 per share. On January 1, 2011, Ward granted stock options for 10,000 shares at $38 per share as additional compensation for services to be rendered over the next three years.

The options are exercisable during a four-year period beginning January 1, 2014, by grantees still employed by Ward. Market price of Ward's stock was $47 per share at the grant date.

The fair value of a similar stock option with the same terms was $12 at the grant date. No stock options were terminated during 2011.

In Ward's December 31, 2011 income statement, what amount should be reported as compensation expense pertaining to the options?

Reference no: EM131105385

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