Ex. 16-138-Stock options. Like 16-12 from excel Prepare the necessary entries from 1/1/14-2/1/16 for the following events using the fair value method. If no entry is needed, write "No Entry Necessary." 1. On 1/1/14, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 18,000 shares of common stock at $40 per share The par value is $10 per share. 2. On 2/1/14, options were granted to each of five executives to purchase 18,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/16. It is assumed that the options were fo services performed equally in 2014 and 2015. The Black-Scholes option pricing mode determines total compensation expense to be $1,900,000. 3. At 2/1/16, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited. Solution 16-138 1. 1/1/14 No entry necessary. 2. 2/1/14 No entry necessary. 12/31/14 Compensation Expense.. 950,000 Paid-in Capital-Stock OptionS........... 950,000 12/31/15 Compensation Expense... 950,000 Paid-in Capital-Stock OptionS....... 950,000 3. 2/1/16 Cash (4 x 18,000 x 540) ........:142124121212121 2,880,000 Paid-in Capital-Stock Options ($1,950,000 x 4/5) .... ... 1,560,000 Common Stock..... 720,000 Paid-in Capital in Excess of Par..... 3,720,000 Paid-in Capital-Stock OptionS..... 340,000 Paid-in Capital-Expired Stock OptionS... 340,000