On January 1, Year 1, Axis Corporation Granted Employees 82,000

On January 1, Year 1, Axis Corporation granted employees 82,000 stock options for 82,000 shares of $2 par value common stock. The exercise price on the date of issue was equal to the market price of $22. There is a two-year vesting period and the options expire in four years. Employees have the right to sell back the shares to the corporation within six months of exercise. At the time of issue, the fair value of the options is estimated to be $31 per option. Unfortunately, the company experiences a series of setbacks and the stock price falls in Year 4. At December 31, Year 4, the options have a fair value of $18 per option. At the end of four years, none of the options have been exercised. What is the appropriate journal entry to record the expiration of the options?

A) $$\begin{array} { | c | r | r | } \hline \text { Liability for Stock-based Compensation } & 1,476,000 & \\\hline \text { APIC - Expired Stock Options } & & 1,476,000 \\\hline\end{array}$$
B) $$\begin{array} { | c | r | r | } \hline \text { APIC - Expired Stock Options } & 2,542,000 & \\\hline \text { Compensation Expense } & & 2,542,000 \\\hline\end{array}$$
C) $$\begin{array} { | c | r | r | } \hline \text { APIC - Expired Stock Options } & 1,271,000 & \\\hline \text { Compensation Expense } & & 1,271,000 \\\hline\end{array}$$
D) $$\begin{array} { | c | r | r | } \hline \text { Liability for Stock-based Compensation } & 1,271,000 & \\\hline \text { Common Stock } & & 164,000 \\\hline \text { APIC - Common } & & 1,107,000 \\\hline\end{array}$$