On January 1, 2016, Crooze Corporation granted compensatory stock options for 10,000 shares of its $1 par value common stock to its employees. The options may be exercised after 2 years of employment. Market price of the common stock on that date was $50 per share and the exercise price was $50 per share. Using a fair value option pricing model, total compensation expense is determined to be $400,000. The options are exercisable beginning January 1, 2018, providing those key employees are still in the employ of the company at the time the options are exercised. The options expire on January 1, 2020.

1. (3 points) Prepare the journal entry at December 31, 2016 to recognize FY 2016 compensation expense on the stock options

2. (3 points) Assume that, on January 1, 2018, 80 percent of the employees exercised their stock options. Prepare the journal entry to record this activity on January 1, 2018

3. (3 points) Assume that the remaining 20 percent of the employees chose not to exercise their stock options by the forfeiture date of January 1, 2020. Prepare the journal entry to record the forfeiture on January 1, 2020