In: Accounting
Rutter Inc. granted 300,000 stock options to executives and employees on January 1, 2017. The options have a strike price is $10 per share and expire in 2019. The par value of the common stock is $1. Using an option pricing model, the company calculates a fair value of $20 per share. The expected service period, or benefit period, is 3 years.
a. Prepare the journal entries for 2017 and 2018.
b. In 2019, 30% of the options are exercised and the remaining options expire.