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The following are events for Sedgewick, Inc. from 1/1/18-2/1/20 1. On 1/1/18, options were granted to each of five executives to purchase 30,000 shares. The
The following are events for Sedgewick, Inc. from 1/1/18-2/1/20 1. On 1/1/18, options were granted to each of five executives to purchase 30,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/20. It is assumed that the options were for services performed equally in 2018 and 2019. The Black-Scholes option pricing model determines total compensation expense to be $3,200,000. 2. At 2/1/20, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited. Required: Prepare the journal entries to record the following using the fair value method 1. Adjusting entry to record compensation expense on December 31, 2018 and 2019. 2. Exercise and forfeiture of stock options on February 1, 2020
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