Question

PLEASE ANSWER ALL PARTS, PLEASE SHOW ALL WORK, PLEASE TYPE ANSWER

Exercise 16-11

	Your answer is partially correct.

On January 1, 2018, Titania Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company’s $10 par common stock at $25 per share. The options were exercisable within a 5-year period beginning January 1, 2020, by grantees still in the employ of the company, and expiring December 31, 2024. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $350,000.

On April 1, 2019, 2,000 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, 2020, 12,000 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, 2018, 2019, and 2020. (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 0 for the amounts.)

Answer 1

Date		Debit	Credit
01-01-2018	No Entry Required for the date of the Grant
31-12-2018	Compensation Expense	$ 175,000.00
	Paid-in Capital—Stock Options (350,000/2)		$ 175,000.00
01-04-2019	Paid-in Capital—Stock Options	$    17,500.00
	Compensation Expense ($175,000 X 2,000/20,000)		$    17,500.00
31-12-2019	Compensation Expense	$ 157,500.00
	Paid-in Capital—Stock Options (175,000-17,500)		$ 157,500.00
31-03-2020	Cash (12,000 X $25)	$ 300,000.00
	Paid-in Capital—Stock Options($350,000 X 12,000/ 20,000)	$ 210,000.00
	Common Stock		$ 120,000.00
	Paid-in Capital in Excess of Par		$ 390,000.00