Prepare the necessary entries from 1/1/17-2/1/19 for the following events using
ID: 2521518 • Letter: P
Question
Prepare the necessary entries from 1/1/17-2/1/19 for the following events using the fair value method. (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.)
No.
Date
Account Titles and Explanation
Debit
Credit
1/1/17
2/1/17
12/31/17
12/31/18
2/1/19
2/1/19
1. On 1/1/17, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 19,000 shares of common stock at $40 per share. The par value is $10 per share. 2. On 2/1/17, options were granted to each of five executives to purchase 19,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/19. It is assumed that the options were for services performed equally in 2017 and 2018. The Black-Scholes option pricing model determines total compensation expense to be $1,850,000. 3. At 2/1/19, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.Explanation / Answer
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There are not entry for rest of dates under Fair value method.
Cash Received on Exercise of 4 employees (19000*40)*4 3040000 Common Stock par value of 76000 share (19000*4)*10 760000 Additional paid-in capital-stock options 4/5*1850000 1480000 Journal for Exercising Option Date Account Debit Credit 2/1/19 Cash 3040000 Additional paid-in capital-stock options 1480000 Common Stock 760000 Additional paid-in capital-common stock 3760000 Journal for Expired Option Date Account Debit Credit 2/1/19 Additional paid-in capital-stock options 370000 Additional paid-in capital-Expired stock options 370000 (1/5*1850000)