On January 1, Year 1, Fields Corporation granted 100,000 stock options to certain executives. The options are exercisable no sooner that December 31, Year 3 and expire on January 1, Year 7. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $9 on the date of grant.

What amount should Fields recognize as compensation expense for Year 1?

A) $0
B) $300,000
C) $450,000
D) $900,000

Answer: B
Explanation: B) 100,000 × $9 = $900,000 / 3 = $300,000