On January 1, 2013, Oliver Foods Issued Stock Options for 40,000

Multiple Choice

On January 1, 2013, Oliver Foods issued stock options for 40,000 shares to a division manager. The options have an estimated fair value of $5 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Oliver Foods' stock price increases by 5% in four years. Oliver Foods initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next four years?

A) $10,000.
B) $45,000.
C) $50,000.
D) No effect.