Question

Cole, Inc. grants options that permit executives to acquire 90,000 of the company's
$2.00 par value stock over the next five years, but not before the vesting period of three years
On January 1, 2006, a value of $3.00 per share is placed on the value of the stock options
that will allow these executives to purchase shares of stock at $9.00 per share
Unexpected turnover during 2007 caused a forfeiture of 8% of the stock option value
Unexpected turnover during 2008 caused an additional forfeiture of 5% of the stock option value
On February 1, 2009 40,000 of the options were exercised when the market value was $41.00 a share
On January 1, 2011, the remaining options were never exercised and allowed to expire
(forfeiture is based upon the number of shares)
What will be the general journal entry for the 12/31/2008 transaction?

Answer 1

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Solution: Naming covention is not available, can be slightly different: "Contribution surplus -Stock option OR: Paid in Capital - Stock option" e.g. Journal entry Account title and explaination Debit Credit Date 12/31/2008 Compensation Expense $ 69,300 $ 69,300 Paid In Capital - stock options (To record the Compensation expense on 2008) Compesation expesene for 2008 before adjustment 90000 2007 turnover effect (90000*896) Less: 7200 2008 turnover effect (270000*5%) Less: 13500 Compesation expesene for 2008 69300