Problem
On January 1, 2016, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2018, and expire on January 1, 2022. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant.
What amount should M recognize as compensation expense for 2016?
$30,000.
$60,000.
$120,000.
$150,000.