On November 1, 2010, Logan Corp. adopted a stock option plan allowing some of their executives to purchase a total of 30,000 common shares. The options were granted on January 1, 2011. The options vest over 4 years. The options expire eight years from the grant date. The exercise price was set at $46 and, using an option pricing model to value the options, the total compensation expense was estimated to be $510,000. At January 1, 2011, the market price of the shares was $49. On January 1, 2012, 3,000 options were terminated (retired) when an employee left the company. The market value of the shares at that date was $32. All the remaining options were exercised during 2015: 17,000 on January 3 when the market price was $62, and 10,000 on May 1 when the market price was $77.

Required a) Prepare the journal entries relating to the stock option plan for the years 2011 through 2015. Assume the employees perform services equally from 2011 through 2014 (7 marks).

b) Discuss one advantages and one disadvantages of offering stock options to employees as a means of compensation (2 marks).