17. The board of directors of Shannon Art Supplies Company approved a plan to grant 120,000 options to its key executives to acquire 120,000 shares of no-par common stock at an exercise price of $10 per share. The effective date of the grant is January 1 of year 1. Shannon granted the options on a date when the company's shares are trading for $20 per share. On the grant date, the Black-Scholes option-pricing model estimates the fair value of the options at $62 each. A three-year service period is required to exercise the options and all options expire at the end of a five-year period. Management estimates a vesting probability of 100%. Read the requirements Requirement a. Determine the compensation expense for year 2. The compensation expense for year 2 is Prepare the entry to record compensation expense for Year 2. (Record debits first, then credits. Exclude explanations from any journal entries.) Dec. 31, Year 2 Account (1) Compensohon Expense |(2) Deferred Compensation Requirement b. Determine the compensation expense for year 3 assuming that 25% of Shannon's key executives left the company at the beginning of year 3 and prior to vesting. The compensation expense for year 3 is Prepare the required journal entries (Record debits first, then credits. Exclude explanations from any journal entries.) Dec. 31, Year 3 Begin by recording the change in vesting probability. Account (5) Additional Paidin Capital Stock qutions (6) Deferred Compensation (8) Prepare the entry to record compensation expense for Year 3. Dec. 31, Year 3 Account (9) Compensation Expense (10) Deferred Condensation (11) (12) Requirement c. Prepare the journal entry required to record the exercise of the options by the remaining key executives. (Record debits first, then credits. Exclude explanations from any journal entries.) Exercise date Account |(13) Cash |(14) Additional Paidin Capital Stock Options (15) Common stock no par (16) 1: Requirements a. Determine the compensation expense for year 2. b. Determine the compensation expense for year 3 assuming that 25% of Shannon's key executives left the company at the beginning of year 3 and prior to vesting. Prepare the required journal entries. C. Prepare the journal entry required to record the exercise of the options by the remaining key executives