Question
Berg Company adopted a stock-option plan on November 30, 20x0, that provided that 70,000 shares of $5 par value stock be designated as available for
Berg Company adopted a stock-option plan on November 30, 20x0, that provided that 70,000 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market value was $12 a share on November 30, 20x0. On January 2, 20x1, options to purchase 28,000 shares were granted to President Tom Winter 15,000 for services to be rendered in 20x1 and 13,000 for services to be rendered in 20x2. Also on that date, options to purchase 14,000 shares were granted to vice president Michelle Bennett 7,000 for services to be rendered in 20x1 and 7,000 for services to be rendered in 20x2. The market value of the stock was $14 a share on January 2, 20x1. 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 of the grant date was $4 per option.
In 20x2 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 $8 a share on December 31, 20x2, when the options for 20x1 services lapsed.
On December 31, 20x3, both President Winter and Vice President Bennett 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 20x0 when the stock-option plan was adopted, in 20x1 when options were granted, in 20x2 when options lapsed, and in 20x3 when options were exercised.
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