Exercise 16-12 Date Account Titles and Explanation Debit Credit 5/1/18 Warning D
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Exercise 16-12
Date
Account Titles and Explanation
Debit
Credit
5/1/18
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Exercise 16-12
On January 1, 2016, Wildhorse Corporation granted 10,100 options to key executives. Each option allows the executive to purchase one share of Wildhorse’s $5 par value common stock at a price of $20 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, Wildhorse’s stock was trading at $26 per share, and a fair value option-pricing model determines total compensation to be $439,000.On May 1, 2018, 8,080 options were exercised when the market price of Wildhorse’s stock was $29 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
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Date Account Title and Explanation Debit Credit 31/12/2016 Compensation Expenses $219,500 Paid-in Capital - Stock Options $219,500 (To record compensation expense for 2016) *$439,000 / 2 = $219,500 31/12/2017 Compensation Expenses $219,500 Paid-in Capital - Stock Options $219,500 (To record compensation expense for 2016) *$439,000 / 2 = $219,500 1/5/2018 Cash*** $161,600 Paid-in Capital - Stock Options* $354,712 Common Stock** $40,400 Paid in Capital - in excess of par common stock $475,912 (To record stock option for 5 years and market price $29 with a balance record in the Paid in capital in excess of common stock, 8,080 option exercised out of 10,000) *($439,000 / 10,000) x 8,080 = $354,712 **8,080 x $5 = $40,400 ***8,080 x $20 = $161,600 1/1/2020 Paid-in Capital - Stock Options $84,288 Paid -in Capital - Expired Stock Options $84,288 (To record paid in capital - stock option for 2020 which is $84,288)
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