Question

Prepare the necessary entries from 1/1/17-2/1/19 for the following events using the fair value method.

1. On 1/1/17, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 19,000 shares of $10 per share.

On 2/1/17, options were granted to each of five executives to purchase 19,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/19. It is assumed that the options were for services performed equally in 2017 and 2018. The Black-Scholes option pricing model determines total compensation expense to be $1,840,000.

At 2/1/19, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited

Answer 1

Answer The necessary entries from 1 /01/2017 to 2 forbeora on orl 01/2017 stockholda adpted purchased = 19.000* Share per = 10 0 101/2017 Account Zilled and explanation - No Entry sequired Debil :- Credit = - @ 210./2017 Account Tilted and explanation : No Entry sequered Debet . Credit -

© 12/31/2017 © Account Tille and Explanation compensation Empenses Paid in capital - stock eption Bang Comparation expens recorded . - 1840.000 I Debet. = 92.000 Gredict .92000 @ 12/31/2018 Accorent Title and explanation Compensation Expenses paid on sepital 184000 stock option Rebit za 2000 Colidel = 92000

© 2/01/2012 Account Tilble and Enplanation Cash (10000 Xux 10) Debit = 400.000 Paud on capite = 18.4000 x Debil . = 147,200 common stock. 19000 84410 760,000 - 100000+147 200 7547200 - 760000 O Credil = 212800 © 211/2019 Account Tittle and explanation Paid in capital stock opt- 1840000 . Debit - 36800 Pead in capital expired condut = 36800 5