Question

On January 1, 2021, Windsor Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company’s $10 par common stock at $23 per share. The options were exercisable within a 5-year period beginning January 1, 2023, by grantees still in the employ of the company, and expiring December 31, 2027. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $378,200.

On April 1, 2022, 2,000 options were terminated when the employees resigned from the company. The market price of the common stock was $35 per share on this date.

On March 31, 2023, 12,000 options were exercised when the market price of the common stock was $39 per share.

Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2021, 2022, and 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

On Jan1, 2018 ,Windsor Inc , granted stock Options
to officer and Key Employee for the purchase
of 20000 shares of the company $ 10 par common stock $23 per share
The option were exerciseable within 5 years period beginning
January 1 ,2020
grantees still the employ of the company and expiring
December 31, 2024
The service period for awarded
Point to Note that in case of Stock option Exercise -
Grant Date - No Journal Entry required
Dec 31 - Compensation Expenses ( under Fair value Option pricing Model)

The service period for awarded for 2 year
So Compensation Expenses for the year = $ 378200/2					1,89,100
Details	Debit($)	Credit($)
Compensation Expense	1,89,100
Capital Stock Option		1,89,100
01st April 2022 , 2000 options were terminated when employee resigned
So we need to derived proportionate amount
Compensation Expense$	1,89,100
Total Share purchased	20,000
Terminated shares	2,000
To record termination of Shares
$189100*2000/23000)	18,910
Details	Debit($)	Credit($)
Capital Stock Option	18,910
Compensation Expense		18,910
31st Dec- 2022
We need to derived Share stock position of balance
Share ( after resigned employee)
Number of share	18000
(20000-2000) shares
Details	Debit($)	Credit($)
Compensation Expense	1,70,190
Capital Stock Option		1,70,190
Compensation Expense	($189100*18000/20000)=$ 170190
( to accounted compensaion expenses)
On March 31, 2023
Option Exercised , when market price $ 39 per share
Number of shares-
12000- Option to exercised' @ $23 per share
Cash - 12000*$23	2,76,000
Capital Stock Option	1,13,460
($189100*12000/20000)=$ 170190
Common Stock -@$10 / share
(12000*10)	1,20,000
Details	Debit($)	Credit($)
Cash - 12000*$23	2,76,000
Capital Stock Option		1,13,460
Common Stock -@$10 / share		1,20,000
Capital paid in excess		42,540	(Balancing Number)
( accounted Exercise Stock Option )
( Stock position Unexercised
20000-2000-12000	6,000