The Happy Co. granted one million employee stock options on June 30, 2009. Each option allowed the holder to buy one share of Happy Co. common stock...

The Company used Black-Scholes option pricing model to estimate the fair value of the options at the grant date. That amount was $2 million. Assume the service period is one year. Happy Co. has a 12/31 year-end, its tax rate is 40%, and the options are “non-qualifying” for tax purposes.Required:A)