On January 1, 20X1, Darth Corp. (a fictional company) granted nonqualified stock options to certain key employees as additional compensation. The options were for 100,000 shares of Darth's $1 par value common stock at an exercise price of $24 per share. The market price of this stock on January 1, 20X1, was $20 per share. The options were exercisable beginning January 2, 20X3, and expire on December 31, 20X9. Based on the Black-Scholes model, the options were valued at $16 per option at the date of grant. On July 1, 20X3, when Darth's stock was trading at $55 per share, all the options were exercised. Darth has a marginal tax rate of 21%. Darth's deduction for compensation expense will not be affected by the $1 million limit. Required: 1. Prepare all the necessary pre-tax journal entries related to the stock options from January 1, 20X1, to July 1, 20X3