on 1/1/10 the stockholders adopted a stock option plan for top executives whereb
ID: 2499384 • Letter: O
Question
on 1/1/10 the stockholders adopted a stock option plan for top executives whereby they would receive rights to purchase op to 60,000 shares of common stock at $40 per share. the par value is $10.
the options vest on 1/1/2012 and expire on 1/1/14. the balck-scholes option pricing model determines total compensation expense to be $1,300,000
on 1/1/13, 48000 options were excercised when the stock was trading at $65 per share.
required.
1) prepare the necessary journal entry to record compensation expense during 2010.
2)prepare the necessary journal entry to record the exercise of the options at 1/1/13
Explanation / Answer
Solution:
Date Journal Debit Credit 31/12/2010 Compensation expense 650,000 Additional paid in capital, stock option 650,000 01/01/2013 Cash 1,820,000 Additional paid in capital, stock option 650,000 Common Stock 240,000 Additional paid in capital, common stock 2,230,000Related Questions
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