On January 1, 2003, Aquinas Corp. granted stock options to key executives for the purchase of 10,000 shares of the company's $5 par value common stock at $20 per share. The options were exercisable within a 2-year period beginning of January 1, 2005 by grantees still in the employ of the company. All options under this plan expire on December 31, 2006. The market price of Aquinas common stock was $25 per share on the date of grant. Aquinas expects a 2% forfeiture rate per year. Application of the Black-Scholes formula to these options produces a value of $40.00 each at the grant date. None of the granted options are actually forfeited prior to vesting. On May 1, 2005 a total of 8,000 options were exercised when the market value of the shares was $30 per share. The remaining 2,000 options expired at the beginning of 2007 when the executives decided not to exercise them. Aquinas' tax rate is 35% for the entire period. Required: Assume that Aquinas adopts the fair value approach for accounting for stock options. Prepare the necessary entries for: 1. Compensation cost in 2003. 2. Compensation expense for 2004. 3. The exercise of the 8,000 options in 2005. 4. The termination of the remaining 2,000 options on January 1, 2007