Silo CorpGranted to Donna, Its Superstar Accountant, the Option to Purchase

Multiple Choice

Silo Corp.granted to Donna, its superstar accountant, the option to purchase Silo common shares for $10, on Jan.1, 20x1.The market price of the shares on that date was $20.The options can be exercised during the period Jan.1, 20x4 through Jan.1, 20x6.The number of shares under option is determined by a formula based on Silo earnings each year.The number of shares actually under option will be the formula value on Dec.31, 20x3.That formula estimated the following number of shares under option at the end of years: 20x1, 200; 20x2, 300.The formula determined the number of shares at Dec.31, 20x3 to be 400.The market prices for Silo shares at the end of years: 20x1, $25; 20x2,
$40, 20x3, $50.What is the recorded compensation expense for 20x2, for Donna?

A) $4,500
B) $3,000
C) $4,000
D) $7,250
E) $5,000