Question

Exercise 16-11

On January 1, 2021, Martinez Inc. granted stock options to officers and key employees for the purchase of 18,000 shares of the company’s $10 par common stock at $27 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 $315,600.

On April 1, 2022, 1,800 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, 10,800 options were exercised when the market price of the common stock was $40 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.

Date	Account Titles and Explanation	Debit	Credit

Answer 1

solution & Journal entries. Date Account titles and explanation Debitts credit & Jan-1 2021 No entry Dec-31 compensation expense 2021 157800 paid in capital -stock options 157810 - (3156008 1/2) (To record compensation expense for 2021) I paid in capital Stock options ISTSO compensation expense T15780 (157800 x 1800 ) 18000 To recood termination of stock options held held by designed employees) Dec-31 compensation expence 142020 paid in capital -stock captions 142020 315600Xllz |(2000-1800);] 18000 (To recognize compensation expense for 2022)

Date Debits) credit & 291600 Mar 31 2093 Account titles and explanation. cash (10800x27) paid in capital - Stock options 315600x costo J 189360 Common stock (10800 x 10) 108000 372960 paid in capital excess of par (to record exercise of stocks options) Notes i Jan 1, 2011 is the date of grant (ii) There are suoo options unexercised as of mar-31, 2022 ( 18600 - 1800-10800)