On January 2, 2007, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights for past services. Those rights are exercisable immediately and expire on January 1, 2010. On exercise, Dean is entitled to receive cash for the excess of the stock’s market price on the exercise date over the market price on the grant date. Dean did not exercise any of the rights during 2007. The market price of Morey’s stock was $30 on January 2, 2007, and $45 on December 31, 2007. As a result of the stock appreciation rights, Morey should recognize compensation expense for 2007 of

  1. $0
  2. $100,000
  3. $300,000
  4. $600,000