On January 1, 2022, ABC Co. granted compensatory stock options for 20,000 shares of its $20 par value common stock to certain of its key employees. The option price per share is $25. Using fair value option pricing model, total compensation expense is determined to be $120,000. The options are exercisable beginning January 1, 2024, providing those key employees are still in the employ of the company at the time the options are exercised. The options will expire on January 1, 2025. The service period is for two years beginning January 1, 2022. All 20,000 options were exercised on January 1, 2024.

A. Using the fair value method, prepare the journal entry to record compensation expense on December 31, 2022.

B. Assuming all those key employees were still employed and all the options were exercised, prepare the journal entry to record the exercise of all 20,000 options on January 1, 2024.