Traditional Stock Option Plan Cliff Vesting

At the beginning of 2022, the Deer Run Corporation made a grant of 40,000 stock options to eight senior executives. After a vesting period of three years, each option can be exercised at a price of $50. The fair market value of each option on the grant date is $70. The common stock has a par value of $1 and a market value on the grant date of $50. On July 1, 2025, and August 30, 2026, 18,000 and 15,000 of the options were exercised. The remaining options were not exercised by January 1, 2027, the date on which the options expire.

1. Calculate compensation expense related to the grant.

2. Prepare the required journal entries for 2022-2027.