Journal entries for employee stock options. Leonard Corporation grants 10,000 stock options to its managerial employees on December 31, Year 3, to purchase 10,000 shares of its \(\$ 10\)-par value common stock for \(\$ 40\) per share. The market price of a share of common stock on this date is \(\$ 30\) per share. Employees can exercise the options immediately if they so choose. A financial consulting firm estimates that the market value of these options on the grant date is \(\$ 60,000\). On June 30, Year 5, holders of 7,000 options exercise their options at a time when the market price of the stock is \(\$ 45\) per share. On November 15, Year 6, holders of the remaining options exercise them at a time when the market price of the stock is \(\$ 52\) per share.

a. Present journal entries to record these transactions on December 31, Year 3; June 30, Year 5; and November 15, Year 6 following the market value method of FASB Statement No. 123. Assume that the firm receives any benefits of the stock option plan in Year 3. Ignore income tax effects.

b. Repeat part a following the APB Opinion No. 25 method of accounting for stock options.

c. Considering only the effect of accounting for stock options and ignoring income taxes, how will the total of shareholders' equity and its components differ by the end of Year 6 under the market value method and the APB Opinion No. 25 method?