On January 1, 2019, the Annatoria Corporation grants its executives options to purchase 40,000 shares of the companys $1 par common stock at a price of $30 per share (the market price at the grant date). The options are exercisable beginning on January 1, 2021 if still employed by the company and then expire five years later on December 31, 2025. The vesting period and service period are the same. The fair value of the options at the grant date is estimated to be $6 per option based on an appropriate option pricing model.

Required:

Create the journal entries to record compensation expense at the grant date and at the end of each applicable year.

January 1, 2019 - Grant Date:

December 31, 2019:

December 31, 2020: