On 1 July 2013 Pearl Pty Ltd Granted 800 Share $\quad$

On 1 July 2013 Pearl Pty Ltd granted 800 share options with an exercise price of $35 to the CFO, conditional on the CFO remaining in employment with the company until 30 June 2016. The fair value of Pearl's shares at that time were assessed to be $40. The exercise price will drop to $30 if Pearl's earnings increase by an average of 8% per year over the three year period. On 1 July 2013 the estimated fair value of the share options with an exercise price of $35 is $10 per option, and if the exercise price is $30, the estimated fair value of the options is $12 per option.
During the year ended 30 June 2014 Pearl's earnings increased by 10% and they are expected to continue to increase at this rate over the next two years.
During the year ended 30 June 2015 Pearl's earnings increased by 9% and Pearl management continued to expect that the earnings target would be achieved.
During the year ended 30 June 2016 Pearl's earnings increased by only 2%. At 30 June 2016 the share price is $23.
Assuming that the CFO decides NOT to exercise his options at 30 June 2016, the following entry would be recorded:

A) DR $\quad$ Wages expense
CR $\quad$ Options issued (equity)
B) DR $\quad$ Options issued (equity)
CR $\quad$ Lapsed options reserve
C) DR $\quad$ Options issued (equity)
CR $\quad$ Retained earnings
D) DR $\quad$ Options issued (equity)
CR $\quad$ Wages expense