Bridgeport Company adopted a stock-option plan on November 30,
2019, that provided that 63,700 shares of $5 par value stock be
designated as available for the granting of options to officers of
the corporation at a price of $9 a share. The market price was $12
a share on November 30, 2020.
On January 2, 2020, options to purchase 29,100 shares were granted
to president Tom Winter—16,200 for services to be rendered in 2020
and 12,900 for services to be rendered in 2021. Also on that date,
options to purchase 13,800 shares were granted to vice president
Michelle Bennett—6,900 for services to be rendered in 2020 and
6,900 for services to be rendered in 2021. The market price of the
stock was $13 a share on January 2, 2020. The options were
exercisable for a period of one year following the year in which
the services were rendered. The fair value of the options on the
grant date was $4 per option.
In 2021, neither the president nor the vice president exercised
their options because the market price of the stock was below the
exercise price. The market price of the stock was $8 a share on
December 31, 2021, when the options for 2020 services lapsed.
On December 31, 2022, both president Winter and vice president
Bennett exercised their options for 12,900 and 6,900 shares,
respectively, when the market price was $15 a share.
Prepare the necessary journal entries in 2019 when the stock-option
plan was adopted, in 2020 when options were granted, in 2021 when
options lapsed, and in 2022 when options were exercised.
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 |
||||
Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 |
||||
(To record options granted to president.) |
||||
Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 |
||||
(To record compensation expense attributable to 2020.) |
||||
Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 |
||||
(To record compensation expense attributable to 2021.) |
||||
Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Nov. 30, 2019Jan. 2, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 |
||||
(To record lapse of president’s and vice president’s options.) |
||||
|
||||
(To record issuance of shares.) |
According to the requirement of the question, we have to record the journal entries.
Year | Accounts Titles and Explanations | Debit ($) | Credit ($) |
2019 | No Journal entry required | ||
(No journal entry would be recorded at the time the stock option plan was adopted) | |||
Jan 2,2020 | No Journal entry required | ||
(To record options granted to president.) | |||
Dec 31, 2020 | Compensation Expense | $92,400 | |
Paid-in Capital-Stock Options (Working Note 1) | $92,400 | ||
(To record compensation expense attributable to 2020) | |||
Dec 31, 2021 | Compensation Expense | $79,200 | |
Paid-in Capital-Stock Options (Working Note 2) | $79,200 | ||
(To record compensation expense attributable to 2021) | |||
Dec 31, 2021 | Paid-in Capital-Stock Options | $92,400 | |
Paid-in Capital - Expired Stock Options | $92,400 | ||
(To record lapse of president’s and vice president’s options) | |||
Dec 31, 2022 | Cash (Working Note 3) | $178,200 | |
Paid-in Capital-Stock Options (Calculated above) | $79,200 | ||
Common Stock (Working Note 4) | $99,000 | ||
Paid-in Capital in Excess of Par (Balancing Figure) | $158,400 | ||
(To record issuance of shares.) |
Working Note:-
1. Calculation of Paid-in Capital-Stock options for 2020
(16,200 + 6,900) * $4 = $92,400
2. Calculation of Paid-in Capital-Stock options for 2021
(12,900 + 6,900) * $4 =$79,200
3. Calculation of Cash
(12,900 + 6,900) * $9 = $178,200
4. Calculation of Common Stock
(12,900 + 6,900) * $5 = $99,000
Thank you...
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