Question
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
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 2, 2011, and were exercisable four years after the grant date (Jan 2, 2015), as long as the executives were still employees. 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 2, 2011, the market price of the shares was $49.
All of the options were exercised during 2015: 17,000 on January 3 when the market price was $62, and 13,000 on May 1 when the market price was $77.
Instructions
- Prepare journal entries relating to the stock option plan for the years 2011 through 2015. Assume that the employees perform services equally from 2011 through 2014. Year end is December 31.
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