Question

On January 1, 2020, Sandhill Corp. granted stock options to its chief executive officer. This is the only stock option plan that Sandhill offers and the details are as follows:

Option to purchase:		2,400 common shares
Option price per share:		$36.00
Fair value per common share on date of grant:		$28.40
Stock option expiration:		The earlier of eight years after issuance or the employee’s cessation of employment with Sandhill for any reason other than retirement
Date when options are first exercisable:		The earlier of four years after issuance or the date on which the employee reaches the retirement age of 65
Fair value of options on date of grant:		$8.00

On January 1, 2025, 1,920 of the options were exercised when the fair value of the common shares was $39. The remaining stock options were allowed to expire. The CEO remained with the company throughout the period.

Assume that the entity follows ASPE and has decided not to include an estimate of forfeitures upon initial recognition of the compensation expense. Record the journal entry on January 1, 2025, the exercise date.

Answer 1

Aus On January 1, 2025 the Engercise Date Options were Excercised 1920 Cash = 4,920 X $ 36 Option Price per share Seash $ 69,120 Contributed Surplus - Stock options - Common shares option to purchase X fair value of x Options options were Engercised Option to purchase 2,400 x $8 x 1.920 2,400 $ 15,360 Contributed Surplus - Stock option Stock optione = $15,360 Total Common shares = $ 69,120 + $15,360 {comme common shares = $84,480

Credit Journal Entry Date Account Titles Debit Jan 1 Cash Alc Dr. $ 69,120 2025 Paid- in Capital - Stock Options Alc Dr. $15,360 To Common shares A/C $84,480 (To Record Exercise of Stock OpHous