Question
The following information applies to Questions 9 and 10. A publicly traded company has a stock-based incentive compensation program for its employees. On January 1,
The following information applies to Questions 9 and 10. A publicly traded company has a stock-based incentive compensation program for its employees. On January 1, 2015, the company granted 120,000 stock options to employees. The $8 exercise price was set to equal the $8 stock price on the grant date. These stock options have a three-year vesting period. The options can be exercised beginning January 1, 2018 and they expire on December 31, 2019. Each option has a grant date fair value of $4, which was determined using the Black-Scholes option pricing model. 100% of the stock options vested. During 2018, the employees exercised 85% of the stock options when the market price of the companys $1 par value common stock was $10 (the other employees were hoping the stock price would increase further, so 15% of the stock options remained unexercised in 2018). What is the appropriate journal entry to record the exercise of 85% of the stock options during 2018?
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