Rex Corporation is authorized to issue 300,000 shares of common stock, $1 par, of which

140,000 shares had been issued. The corporation initiated a stock bonus plan during 2020 for

designated managers. Under the plan, options vest with the grantee if still employed by the

company two years from the date of grant. The rights are nontransferable and expire

immediately after December 31, 2024. The exercise price is $20 per share. Assume that

manager Ruth Roe receives stock options on January 1, 2020, to purchase 1,000 shares of Rex

common stock. The market price of Rex common stock on the date of grant was $24 per share.

Using an option-pricing model the fair value of the options granted to Roe is computed to be $12

per option.

Required:

a. Compute the total amount of compensation cost for the grant made to Roe.

b. What entry should be made on the date of the grant?

c. What entry should be made at December 31, 2020?

d. What entry should be made to record the exercise of the options held by Roe on

December 31, 2024, when the stock of Rex Corporation was trading at $35 per share?

e. Assume INSTEAD that the common stock is trading at $18 per share on December 31,

2024. What journal entry (if any) should be recorded?