Question
On November 1, 2014, Columbo Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company's $10 par
On November 1, 2014, Columbo Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company's $10 par value common stock.
The options were granted on January 2, 2015, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant.
The option price was set at $40, and the fair value option-pricing model determines the total compensation expense to be $450,000.
On January 3, 2017, 20,000 options were exercised when the market price was $67.
Prepare journal entries relating to the stock option plan on the following dates. Assume that the employee performs services equally in 2015 and 2016.
On January 2, 2015:
On December 31, 2015:
On January 3, 2017:
| On January 2, 2015: Dr. Cash 300,000 Cr. Common Stock 300,000
On December 31, 2015: Dr. Compensation Expense 225,000 Cr. PIC - Stock Options 225,000
On January 3, 2017: Dr. Cash 200,000 Dr. PIC - Stock Options 900,000 Cr. Common Stock 800,000 Cr. PIC - Common Stock 300,000 | ||
| On January 2, 2015: No Entry
On December 31, 2015: Dr. Compensation Expense 225,000 Cr. PIC - Stock Options 225,000
On January 3, 2017: Dr. Cash 800,000 Dr. PIC - Stock Options 300,000 Cr. Common Stock 200,000 Cr. PIC - Common Stock 900,000 | ||
| On January 2, 2015: Dr. Cash 300,000 Cr. Common Stock 300,000
On December 31, 2015: Dr. Compensation Expense 225,000 Cr. PIC - Stock Options 225,000
On January 3, 2017: Dr. Cash 800,000 Dr. PIC - Stock Options 300,000 Cr. Common Stock 200,000 Cr. PIC - Common Stock 900,000 | ||
| On January 2, 2015: No entry.
On December 31, 2015: Dr. Compensation Expense 225,000 Cr. PIC - Stock Options 225,000
On January 3, 2017: Dr. Cash 200,000 Dr. PIC - Stock Options 900,000 Cr. Common Stock 800,000 Cr. PIC - Common Stock 300,000
|
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Foundations of Finance The Logic and Practice of Financial Management
Authors: Arthur J. Keown, John D. Martin, J. William Petty
8th edition
978-0132994873
