Journal entries for employee stock options. Watson Corporation grants 20,000 stock options to its managerial employees on

Question:

Journal entries for employee stock options. Watson Corporation grants 20,000 stock options to its managerial employees on December 31, 2008, to purchase 20,000 shares of its $10 par value common stock for $25 per share. The market price of a share of common stock on this date is $18 per share. Employees must Work for another three years before they can exercise the options. An option-pricing model indicates that the value of these options on the grant date is $75,000. On April 30, 2012, holders of 15,000 options exercise their options at a time when the market price of the stock is $30 per share. On September 15, 2013, holders of the remaining options exercise them at a time when the market price of the stock is $38 per share.

Present journal entries to record these transactions on December 31, 2009, 2010, and 2011; on April 30, 2012; and on September 15, 2013. Assume that the firm receives any benefits of the stock option plan during 2009, 2010, and 2011 and that the firm reports on a calendar-year basis. Ignore income tax effects.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...