On November 1, 2017, Concord Company adopted a stock-option plan that granted options to key executives...

On November 1, 2017, Concord Company adopted a stock-option plan that granted options to key executives to purchase 39,000 shares of the company’s $9 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $585,000. All of the options were exercised during the year 2020: 26,000 on January 3 when the market price was $69, and 13,000 on May 1 when the market price was $80 a share.

Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee performs services equally in 2018 and 2019

Expert Solution

SOLUTION

Date	Accounts title and Explanation	Debit ($)	Credit ($)
1/2/2018	No Entry

12/31/2018	Compensation Expense	292,500
	Paid-in Capital-Stock Options		292,500
	[To record compensation expense for 2018 (1/2 * $585,000)]

12/31/2019	Compensation Expense	292,500
	Paid-in Capital-Stock Options		292,500
	[To record compensation expense for 2019 (1/2 * $585,000)]

1/3/2020	Cash (26,000 * $30)	780,000
	Paid-in Capital-Stock Options ($585,000 * 26,000/39,000)	390,000
	Common Stock (26,000 * $9)		234,000
	Paid-in Capital in Excess of Par		936,000
	(To record issuance of 26,000 shares of $9 par value stock upon exercise of options at option price of $30)

5/1/2020	Cash (13,000 * $30)	390,000
	Paid-in Capital-Stock Options ($585,000 * 13,000/39,000)	195,000
	Common Stock (13,000 * $9)		117,000
	Paid-in Capital in Excess of Par		468,000
	(To record issuance of 13,000 shares of $9 par value stock upon exercise of options at option price of $30)

ekkarill92 answered 2 years ago

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