Reference no: EM132842222

On June 30, 2018, Bramble Corp. granted compensatory stock options for 23000 shares of its $24 par value common stock to certain of its key employees. The market price of the common stock on that date was $32 per share and the option price was $29. Using a fair value option pricing model, total compensation expense is determined to be $111000. The options are exercisable beginning January 1, 2020, providing those key employees are still in the employ of the company at the time the options are exercised. The options expire on June 30, 2021.

Problem 1: On January 4, 2020, when the market price of the stock was $37 per share, all options for the 23000 shares were exercised. The service period is for two years beginning January 1, 2018. Using the fair value method, what should be the amount of compensation expense recorded by Bramble Corp. for these options on December 31, 2018?

Option 1: $55500

Option 2: $26016

Option 3: $0

Option 4: $111000