Sweeney Company granted its president 2,000 stock options on January 1, Year1. The options give the president the right to purchase shares of the company for $40 per share on December 31, Year2. Sweeney's common stock has a par value of 41 per share. The options are expected to vest and be exercised.

the options have a fair value of $10 per option based on an option pricing model

the fair value of the stock is $45 per share at 12/31/Year1

the fair value of the stock is $55 per share at 12/31/Year2

1. Record the journal entry at 12/31/Year1 to reflect compensation expense related to the options.

2. Record the journal entry at 1/1/Year3 when the presidents exercises all 2,000 options.