On January 1, Year 1, Nini Tech Corp granted options to its new CEO, Jane Black, which allows Jane to purchase 45,000 shares of $1.00 par value ordinary share for $40.00 per share. The options can be exercise after December 31, Year 3 and expire at March 31, Year 4. On the grant date, the market price of the share was $30.00 per share. Using an acceptable option valuation model, Nini decided that the options had a fair value of $240,000 on the grant date. The options serve as compensation for services rendered during the first three years.

Required:

1. Prepare the journal entry on grant date.

2. Prepare the journal entries for all three years to record compensation expense.

3. Prepare the journal entry assuming one half of the options are exercised on January 1, Year 4.

4. Prepare the journal entry for the expiration of the options not exercised on January 1, Year 4.