Question: On January 1, 2008, Downs Company granted Tim Wright, an employee, an option to buy 1,000 shares of Downs Co. stock for $25 per share,

On January 1, 2008, Downs Company granted Tim Wright, an employee, an option to buy 1,000 shares of Downs Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $7,500. Wright exercised his option on September 1, 2008, and sold his 1,000 shares on December 1, 2008. Quoted market prices of Downs Co. stock during 2008 were January 1 $25 per share September 1 $30 per share December 1 $34 per share The service period is for three years beginning January 1, 2008. As a result of the option granted to Wright, using the fair value method. Downs should recognize compensation expense for 2008 on its books in the amount of a. $9,000 b. $7,500 c. $2,500 d. $1,500 Please show the work or calculations on how to get the correct answer. Thanks

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