On January 1, 2012, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent 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 $2,800. Williams exercised his option on September 1, 2012, and sold his 400 shares on December 1, 2012. Quoted market prices of Trent Co. stock during 2012 were:
January 1 $30 per share
September 1 $36 per share
December 1 $40 per share
The service period is for two years beginning January 1,2012. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2012 on its books in the amount of:
A) $4,000.
B) $2,800.
C) $1,400.
D) $0.