Aylmer Corp., a public company, adopted a stock option plan on November 30, Y4, designated 120,000
common shares as available for the granting of options to officers of the corporation at an exercise price of $9.20 a share.
The market value was $11.25 a share on November 30, Y4.
On January 2, Y5, options to purchase 55,000 shares were granted to President Riley.
These were to be earned equally over the subsequent two years. The shares' market value was $14.00 a share on January 2, Y5.
The options were exercisable for a period of one year following the years in which the services were rendered.
On January 2, Y5, the value of the options was estimated at $653,000.
On June 8, Y7, the president exercised 42,000 of the options. The shares' market value was $9.60 a share on December 31, Y7
when the rest of the options expired.
REQUIRED:
a. Prepare the necessary journal entry in Y4 when the stock options were granted
b. Prepare the necessary journal entry in Y5 and Y6 when the stock options were earned
c. Prepare the necessary journal entry in Y7 when the stock options were exercised
d. Prepare the necessary journal entry in Y7 when the rest of the stock options expired