(Stock Option Plan) ISU Company adopted a stock option plan on November 30, 2005, that progpEnrs vided that 70,000 shares of $5 par value stock be designated as available for the granting of options to aa officers of the corporation at a price of $8 a share. The market value was $12 a share on November 30, 2005.

On January 2, 2006, options to purchase 28,000 shares were granted to president Don Pedro—15,000 for services to be rendered in 2006 and 13,000 for services to be rendered in 2007. Also on that date, options to purchase 14,000 shares were granted to vice president Beatrice Leonato—7,000 for services to be rendered in 2006 and 7,000 for services to be rendered in 2007. The market value of the stock was $14 a share on January 2, 2006. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $3 per option.

In 2007 neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market value of the stock was $7 a share on December 31, 2007, when the options for 2006 services lapsed.

On December 31, 2008, both president Pedro and vice president Leonato exercised their options for 13,000 and 7,000 shares, respectively, when the market price was $16 a share.

Instructions Prepare the necessary journal entries in 2005 when the stock option plan was adopted, in 2006 when options were granted, in 2007 when options lapsed, and in 2008 when options were exercised.