Journal entries for employee stock options. Watson Corporation grants 20,000 stock options to its managerial employees on December 31. Year 6, 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 two years before they can exercise the options. A financial consulting firm estimates that the market value of these options on the grant date is $75,000. On April 30. Year 9, 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. Year 10, 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 3 1 , Year 6, Year 7, and Year 8; on April 30, Year 9; and on September 15, Year 10 following the market value method.

Assume that the firm receives any benefits of the stock option plan during Year 6, Year 7. and Year 8 and that the firm reports on a calendar-year basis. Ignore income tax effects.