Question

On January 1, 2016, Metlock Corporation granted 10,300 options to key executives. Each option allows the executive to purchase one share of Metlock’s $5 par value common stock at a price of $21 per share. The options were exercisable within a 2-year period beginning January 1, 2018, if the grantee is still employed by the company at the time of the exercise. On the grant date, Metlock’s stock was trading at $26 per share, and a fair value option-pricing model determines total compensation to be $403,000.

On May 1, 2018, 8,240 options were exercised when the market price of Metlock’s stock was $31 per share. The remaining options lapsed in 2020 because executives decided not to exercise their options.

Prepare the necessary journal entries related to the stock option plan for the years 2016 through 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.)

Date	Account Titles and Explanation	Debit	Credit
1/1/1612/31/1612/31/175/1/181/1/20
1/1/1612/31/1612/31/175/1/181/1/20
1/1/1612/31/1612/31/175/1/181/1/20
5/1/18
1/1/1612/31/1612/31/175/1/181/1/20

Answer 1

Date	Account tittles and explanation	Debit	Credit
1/1/2016	No entry
31/12/2016	Compensation expense (403000*1/2)	2,01,500
	Paid in capital stock options		2,01,500
31/12/2017	Compensation expense	2,01,500
	paid in capital stock options		2,01,500
1/5/2018	Cash(8240* $21)	1,73,040
	paid in capital stock options ($403000*8240/10300)	3,22,400
	Common stock (8240 *5)		41,200
	Paid in capital in excess of par		4,44,200
1/1/2020	Paid in capital stock options ($403000 - $322400)	80,600
	Paid in capital from expired stock		80,600