Question

Exercise 16-11 On January 1, 2021, Buffalo Inc. granted stock options to officers and key employees for the purchase of 23,000 shares of the company's $10 par common stock at $25 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 $330,600. On April 1, 2022, 2,300 options were terminated when the employees resigned from the company. The market price of the common stock was $36 per share on this date. On March 31, 2023, 13,800 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 o for the amounts.) Date Account Titles and Explanation Debit Credit

Answer 1

solution:- Journal Entries and Explanation Date Jan 1, 2021 Account Titles NO Entry Debil:(!) Greditat) $0 $0 $165,300 Dec-31, compensation Expense 2021 Paid-in capital - Stock options ($330,600 4112) $ 165,300 (to record compensation expense foy 2021) . $16,530 Apr.1, - 2022 $16,530 paid-in capital-stock options compensation expense ($165,300%. 4300 \ 23,000) (to record termination of stock options held by resighed employees)

$148,710 Dec-31, 2022 compensation Expense paid. in capital-stock options . ($330,600 x 112 x 20.700) $148,170 23,000) (to recognize compensation expense for 2022) .. May-sli 2023. cash (13,800x825) $ 345,000 paid in capital -stock options $198,360 ..($330,600+ 1380012:3000) common stock (13,800x810) Paid-in capital excess of par. (to record exercise of stock options) $138,000 $405,360 Notes: 1) Jan-1,2021 is the deite of grant. 2) There are 6,900 options unexercised (23,000 -2,300 - 13,800). as of Mar 31, 2022

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