In order to retain certain key executives, Smiley Corporation granted them incentive stock options on December 31, 2017. 150,000
options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2018 $46 per share December 31, 2019 51 per share December 31, 2020 50 per share The options were granted as compensation for executives’ services to be rendered over a two-year period beginning January 1, 2018. The Black-Scholes option pricing model determines total compensation expense to be $1,500,000. What amount of compensation expense should Smiley recognize as a result of this plan for the year ended December 31, 2019 under the fair value method?
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