Question

E16-10 (L03) (Issuance and Exercise of Stock Options) On November 1,2017, Columbo Company adopted stock-option plan that granted options to key executives to purchase 30,000 shares of the company's $10par value common stock The oplins were granted on January 2,2018, and were exercisable 2 years after the date of grant if the grante was sill an employe of he company. The options expired 6 years from date of grant. The option price was setat $40, and the fair value option-prig model determines the total compensation expense to be $450,000. All of the options were exercised during the year 2020: 200 on January 3 when the market price was $67, and 10 om May 1 when the market price was $77 a share Instructions Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee erforms services equally in 2018 and 2019 7. CH 16: EPS with simple capital structure E16-16 (L04) (EPS: Simple Capital Structure) On January 1, 2018, Wilke Corp. had 480,000 shares of common stock out- standing. During 2018, it had the following transactions that affected the common stock account February 1 March 1 Issued 120,000 shares Issued a 10% stock dividend Acquired 100,000 shares of treasury stock Issued a 3-for-1 stock split Reissued 60,000 shares of treasury stock May 1 June 1 October 1 earned net income of $3,456,000 during 2018 In addition, it had 100,000 shares of 9%, $100 par aferred stock outstanding for the entire year. Because of liquidity considerations a preferred dividend in 2018. Compute earnings per share for 2018 tinns the weighted-average number of shares outstanding as of December 31, 2018 ulative Compute eamings per share for 2018 tinued operations of $432,000 I in part (a)

Answer 1

ANSWER:

Date	Account title and Explanation	Debit	Credit
01/02/2018	No entry
	(date of grant ; total compensation cost amounts $450,000)
12/31/2018	Compensation Expense	225,000
	Paid-in Capital—Stock Options		225,000
	(1/2 * $450,000)
12/31/2019	Compensation Expense	225,000
	Paid-in Capital—Stock Options		225,000
	(1/2 * $450,000)
01/03/2020	Cash (20,000 * $40)	800,000
	Paid-in Capital—Stock Options ($450,000 * 20,000/30,000)	300,000
	Common Stock (20,000 * $10)		200,000
	Paid-in Capital in Excess of Par		900,000
05/01/2020	Cash (10,000 * $40)	400,000
	Paid-in Capital—Stock Options ($450,000 * 10,000/30,000)	150,000
	Common Stock		100,000
	Paid-in Capital in Excess of Par common stock		450,000