Wall Drugs Offered an Incentive Stock Option Plan to Its $\begin{array}{|l|l|l|}\hline \text { Compensation expense } & 20,000 & \\\hline \text { Common stock } & & 20,000 \\\hline\end{array}$

Multiple Choice

Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2018, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2021, and expire December 31, 2022
- Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record compensation expense for the year 2018?

A)
B) $\begin{array}{|l|l|l|}\hline \text { Compensation expense } & 20,000 & \\\hline \text { Common stock } & & 20,000 \\\hline\end{array}$
C) $\begin{array}{|l|l|l|}\hline \text { Compensation expense } & 20,000 & \\\hline \text { Paid-in capital?stock options } & & 20,000 \\\hline\end{array}$
D) $\begin{array}{|l|l|l|}\hline \text { Compensation expense } & 80,000 & \\\hline \text { Paid-in capital—stock options } & & 80,000 \\\hline\end{array}$