In January 2017 options were granted to each of five executives to purchase 18000 shares (a total of 90000 options were issued- 5 x 18000) The options were non-transferable, and the executives had to remain an employee of the company to exercise the option. It is assumed that the options were for services performed equally in 2017 and 2018. The black-Scholes option pricing model determines total compensation expense to be 1900,000. The options vested on 1/1/2019 and will expire on 1/1/2020.

Prepare journal entry required at the end of 2017 and 2018 for stock options.

On 2/1/2019 four executives exercised their options when the stock was trading for 48 per share. Executives chose not to exercise his options and let them expire.