What amount should be reported as compensation expense

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Problem 1: 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 year 10 at $42 per share. On January 1, year 11, 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 4-year period beginning January 1, year 14, by grantees still employed by Ward. Market price of Ward's stock was $47 per share at the grant date. No stock options were terminated during year 11. Ward uses the intrinsic method of accounting for stock option plans. In Ward's December 31, year 11, income statement, what amount should be reported as compensation expense pertaining to the options?

A. $90,000

B. $40,000

C. $30,000

D. $0

Reference no: EM132773689

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