Recording Stock Options: Compensation Expense, Exercise On January 1, Holiday Inc. offered a stock option incentive plan
Question:
Recording Stock Options: Compensation Expense, Exercise
On January 1, Holiday Inc. offered a stock option incentive plan to a top executive. The plan provided the executive 300 stock options for Holiday Inc. $1 par value, common stock at an option price of $15 per share through the expiration date of January 1 of Year 7. The fair value of the options based upon an option-pricing model on January 1 of Year 1, is $9,000. The market price at year-end of Holiday Inc. stock is $15 per share on January 1 of Year 1. The requisite service period is 3 years. The options were exercised on March 1 of Year 4, when the market price of the stock was $20 per share.
a. Prepare the journal entry (if any) on January 1 of Year 1.
b. Prepare the adjusting journal entry on December 31 of Year 1, the company's year-end.
c. Prepare the journal entry on March 1 of Year 4.
Intermediate Accounting Volume 2
ISBN: 9781618533135
2nd Edition
Authors: Hanlon, Hodder, Nelson, Roulstone, Dragoo