On January 1, 2010, Wilson Corporation granted Emelia Walker, its president, a compensatory stock option plan to purchase 8, 000 shares of Wilson's $10 par common stock.The option price is $25 per share and the option has a fair value of $7 per option, which is exercisable on January 1, 2014, after four years of service.How much compensation expense should Wilson recognize on December 31, 2010?

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Quizplus · Accepted Answer

The compensation expense is calculated based on the fair value of the options granted, which is $7 per option for 8,000 shares, totaling $56,000. This expense is recognized over the service period required for the option to vest, which is four years. Therefore, the annual recognized compensation expense is $56,000 / 4 = $14,000.

On January 1, 2010, Wilson Corporation Granted Emelia Walker, Its