Reference no: EM132592522

DFG expenses stock options as required by GAAP. On January 1, 2017, DFG granted 100 executives 200 options each. Each option entitled the option holder to purchase one share of DFG common stock at $8 per share. The options will vest on January 1, 2019.

Question 1: On the grant date, January 1, 2017, the stock was quoted on the stock exchange at $10 per share. The fair value of the options on grant date was estimated to be $3 per option. What is the amount of compensation expense DFG should recognize with respect to the options during 2017, 2018, and 2019, respectively?

Option 1: $10,000, $10,000 and $10,000

Option 2: $20,000, $20,000 and $20,000

Option 3: $0, $0 and $60,000

Option 4: $30,000, $0 and $0