At the beginning of the first year, the Olympic company issued 10,000 stock options to an executive at an exercise price of US $ 45 (convertible to 10,000 ordinary shares), provided that the executive met the performance requirements and served for 3 years. On the grant date, the estimated fair value of the stock option with an exercise price of $ 45 is $ 15. If the exercise price is $ 25, the estimated fair value of the option is $ 31. If the revenue of the Olympic company grows at an average annual rate of 15% within three years, the execution price will be reduced to $ 25. In the first year, the company's earnings increased by 16%, and it is expected to continue to grow at this rate in the next two years. In the second year, the company's profit increased by only 3%, the company does not expect the profit target to be achieved. In the third year, the company's earnings increased by 4%. The supervisor completed three years of service and therefore met the performance requirements.

Required:

1. a) Prepare journal entries for Year 1 to Year 3 relating to compensation expense.

2. b) The executive exercised half of the share options on 3 January of Year 4. The executive did not exercise the remaining share options and the right is lapsed in Year 4. Prepare all journal entries for Year 4 relating to the share options.