Question

On January 1, 2021, Metlock 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 $379,600. On April 1, 2022, 1.800 options were terminated when the employees resigned from the company. The market price of the common stock was $35 per share on this date. On March 31, 2023, 10,800 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 Ofor the amounts.) Date Account Titles and Explanation Debit Credit + Chapter 16 Homework Question 12 of 15 -/1 <

Answer 1

Date	Account title and Explanation	Debit	Credit
Jan 1, 2021	No entry
Dec 31, 2021	Compensation Expense ($379,600 / 2)	$189,800
	Paid in capital stock option		$189,800
	(To record compensation expense for year 2021)
Apr 1, 2022	Paid in capital stock option	$18,980
	Compensation expense ($189,800*1800/18,000)		$18,980
	(To record termination of stock opttion)
Dec 31, 2022	Compensation expense	$170,820
	Paid in capital stock option ($379,600/2)*16,200/18,000		$170,820
	(To record compensation expense for year 2022)
Mar 31, 2023	Cash (10,800*$27)	$291,600
	Paid in capital stock options($379,600*10,800/18,000)	$227,760
	Common stock (10,800*$10)		$108,000
	Paid in capital, in excess of par-common		$411,360
	(To record exercise of stock options)