On January 1, 2012, Barwood Corporation granted 5,460 options to executives. Eac

Question

On January 1, 2012, Barwood Corporation granted 5,460 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $75 per share on the date of grant. The fair value of the options at the grant date is $152,000. The period of benefit is 2 years. Prepare Barwood's journal entries for January 1, 2012, and December 31, 2012 and 2013. (If no entry is required, enter No Entry a s the description and O as the amount)

Explanation / Answer

Annula expense = Fair value/Noof yrs vested = 152000/2 = 76000

1/1/12 Grant Date - No entry

12/31/12 Dr Compensation expense 76,000

Cr Contributed surplus 76,000

To record compensation expense for year 2012

12/31/13 Dr Compensation expense 76,000

Cr Contributed surplus 76,000

To record compensation expense for year2013

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