On January 1st year 3, Terrys Board of Directors issued the management team 25,600 stock options for Terrys $1 par common stock. Terrys stock price on that day was $3.60/share. The Board set the strike price of the options at $5.20/share to encourage the management team to focus on improving the companys stock price. The average stock price during Year 3 was $6.80/share. The options will vest 4 years from issuance and, according to the Black Scholes Model, have a fair value of $4.80 each on the date issued. Terrys management was pleased with the decision because this is the first time that the Board has offered them options as a form of compensation, although they were disappointed that the options could only be used to purchase stock, not redeemed for their fair value.

Need to have correct Journal Entries and work