On January 1, 2021, Tsang Ltd. granted 10,000 options to key executives. Each option allows the executive to purchase one share of Tsang’s HK$5 par value ordinary shares at a price of HK$20 per share. The options were exercisable within a 2-year period beginning January 1, 2023, if the grantee was still employed by the company at the time of the exercise (the service period is 2 years). On the grant date, Tsang’s shares were trading at HK$25 per share, and a fair value option-pricing model determines total compensation to be HK$450,000. On May 1, 2023, 9,000 options were exercised when the market price of Tsang’s shares were HK$30 per share. The remaining options lapsed in 2025 because executives decided not to exercise their options.

Instructions

Prepare the necessary journal entries related to the share-option plan for the years 2021 through 2025.