Globe Corporation, a new environmental control company, initiated a performance-based stock option plan for its management on January 1, 2012. The plan provided for the granting of a variable number of stock options to management personnel who worked for the entire 4-year period ending December 31, 2015, depending on the net income earned by the company in 2015. No options were granted for the first $50,000 of net income.
Thereafter, the following options were available based on the level of net income in 2015.
$50,000-$99,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 stock options
$100,000-$124,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000 stock options
$125,000-$149,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 stock options
$150,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 stock options
The exercise price for the $5 par common stock was $20 per share. The fair value of the options on the grant date was $9.
Assume the market price for the Globe stock and Globe's forecasted 2015 net income were as follows at each of the following dates:
.................................................................Stock Price...........Forecasted 2015 Income
January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . $24...............................$120,000
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . 31.................................140,000
December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 26.................................170,000
December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . 32.................................135,000
December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . 33............................... 145,000 (actual)
Instructions:
Prepare journal entries related to the stock options of Globe for the period 2012-2015 assuming that all available options are exercised on December 31, 2015.