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On January 2, year 1, Morey Corp. granted Dean, its president,
20,000 stock appreciation rights for past services. Those
rights are exercisable immediately and expire on January 1, year
4. 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 year 1. The market price of Morey’s stock was $30 on
January 2, year 1, and $45 on December 31, year 1. As a result of
the stock appreciation rights, Morey should recognize compensation
expense for year 1 of