What sheridan should recognize compensation expense

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On January 1, 2019, Sheridan Company granted Sam Wine, an employee, an option to buy 1,000 shares of Sheridan Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $5340. Wine exercised his option on October 1, 2021 and sold his 1,000 shares on December 1, 2021.

Quoted market prices of Sheridan Co. stock in 2021 were:

July 1$28 per share

October 1$34 per share

December 1$38 per share

Problem 1: The service period is for three years beginning January 1, 2021. As a result of the option granted to Wine, using the fair value method, Sheridan should recognize compensation expense for 2019 on its books in the amount of

Option 1: $1780.
Option 2: $5340.
Option 3: $1335.
Option 4: $0.

Reference no: EM132844117

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