Accounting for Stock Options

On April $1$ of Year $1,$ Badger Corp. announced a stock option incentive plan for its top executives. The plan provides certain executives stock options for the company's common stock. Each option allows for the

purchase of one share of common stock, par $$1,$ at a standard option price of $$25$ per share. The rights are nontransferable and are exercisable three years after the grant date and prior to five years from the

grant date. Continuing employment is required through the exercise date, and the requisite service period ends on the first possible exercise date.

On April $1$ of Year $1,4,000$ options were granted to employees when the market price was $$30$ per share. Using an option$-$pricing model, the fair value of the options granted was $$36,000.$ Employees exercised

$2,400$ options on June $30$ of Year $4,$ when the market price of the stock was $$45$ per share.

a$.$ Compute the total amount of compensation cost for the grant made on April $1$ of Year $1.$

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b$.$ Record the entry for compensation expense on December $31$ of Year $1,$ Badger's year$-$end.

c$.$ Record the entry for the exercise of options on June $30$ of Year $4.$