Question

2. The following events occurred at Charlotte Company surrounding stock options Charlotte uses the fair value method of accounting for stock options. a. On 1/1/18 options were granted to each of four executives to purchase 5.000 shares (a total of 20,000 shares) of the company's $2 par value common stock at a price of $30. The options were non-transferable and the executive had to remain an employee of the company through 12-31-19 to exercise the options The options expire on 2/1/20. The Bla determines the fair value of the options to be $1,500,000. b. On 4/5/19, one of the four executives resigned from the company. c. On 2/1/20, the remaining three executives exercised their options Required: Prepare any necessary entries for 1/1/18, 12/31/18, 4/5/19, 12/31/19 and 2/1/20. If no entry is necessary, indicate as such.

Answer 1

Deut credit year 16/ 2018 employee compensation exp. Alcor $ 15,00,000 15,00,000 Cgiven) TO Employee stock option ne 750,000 oldlo18 $ 7,99,000 4/5/2019 * Sep 184,500 profit and loss Ale or TO Employce compensation exp. Ale (15,00,000/2yco) General Reserve Ale or to profit & lon Ale (1900 , 317) profit and lon Ale or TO Employe compensation exp.tk ( 15,00,000-3, 75,000 92959u 4,87,00 1* $63,500 12/ 2014 1 562,800

capital exper & normal growth pel is 15% Corporate 2/1/20 Bank A1 or socox 3% 30] Employee stock option fl ox2] To equity capita $ 450.000 $ 1125000 $ 157.000 [4, 50,000+ 1125000]