On January 1, 2018, Wendy Day Co

Multiple Choice

On January 1, 2018, Wendy Day Co. granted stock options to key executives exercisable for 500,000 shares of the company's common stock at $18 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period beginning January 1, 2022, by the executives still in the employ of the company. No options were terminated during 2018, but the company anticipates 5% forfeitures over the life of the stock options. The market price of the common stock was $18 per share at the date of the grant. Wendy Day estimated the fair value of the options at $4 each. 1% of the options are forfeited during 2019 due to executive turnover. What amount should Wendy Day record as compensation expense for the year ended December 31, 2019, assuming the company chooses to estimate forfeitures?

A) $475,000.
B) $495,000.
C) $500,000.
D) $520,000.