Exercise 16-11 On January 1, 2018, Shamrock Inc. granted stock options to office

Question

Exercise 16-11 On January 1, 2018, Shamrock Inc. granted stock options to officers and key employees for the purchase of 21,000 shares of the company's $10 par common stock at $25 per share. The options were exercisable within a 5-year period beginning January 1, 2020, by grantees still in the employ of the company, and expiring December 31, 2024. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $328,400 On April 1, 2019, 2,100 options were terminated when the employees resigned from the company. The market price of the common stock was $36 per share on this date. On March 31, 2020, 12,600 options were exercised when the market price of the common stock was $40 per share. Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2018, 2019, and 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 O for the amounts.) Account Titles and Explanation Debit Mar. 31, 2020 Question Attempts: 0 of 2 used

Explanation / Answer

ans)

1/1/2018 No entry - this is the Date of grant

31/12/2018 Compensation expense 164200

Paid in capital - stock options 164200

(328400 X 1/2)

( To record compensation expense for 2018)

Apr 1, 2019   Paid-in Capital—Stock Options 16420

Compensation Expense 16420

(164200 X 2100 / 21000)

( To record termination of stock options held by resigned employees)

Dec 31, 2019   Compensation Expense 147780

Paid-in Capital—Stock Options 147780

(328400 X 1/2 X 18900 /21000)

(To recognize compensation expense for 2019)

Mar 31, 2020   Cash (12600 X 25) 315000

Paid-in Capital—Stock Options 197040

(328400 X 12600/21000)

Common Stock (12600 X 10) 126000

Paid-in Capital in Excess of Par 386040

(To record exercise of stock options)

* There are 6300 options unexercised as of 31/3/2020 (21000-2100-12600)

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