On January 1, 2019, Waterway Corporation granted 10,500 options to key executives. Each option allows the...

On January 1, 2019, Waterway Corporation granted 10,500 options to key executives. Each option allows the executive to purchase one share of Waterway’s $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2021, if the grantee is still employed by the company at the time of the exercise. On the grant date, Waterway’s stock was trading at $24 per share, and a fair value option-pricing model determines total compensation to be $394,000. On May 1, 2021, 8,400 options were exercised when the market price of Waterway’s stock was $29 per share. The remaining options lapsed in 2023 because executives decided not to exercise their options.

Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Expert Solution

In this question, we have to record Journal entries.

Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2023.

Date	Accounts Title and Explanation	Debit	Credit
January 1, 2019	No Journal Entry Required

Dec. 31, 2019	Compensation Expenses ($394,000 / 2)	$197,000
	Paid in Capital -Stock options		$197,000
	(To Record the compensation expense for 2019)

Dec. 31, 2020	Compensation Expenses ($394,000 / 2)	$197,000
	Paid in Capital -Stock options		$197,000
	(To Record the compensation expense for 2019)

Dec. 31, 2021	Cash (8,400 * $20)	$168,000
	Paid in Capital - Stock options ($394,000 * (8,400/10,500)	$315,200
	Common Stock (8,400 * $)		$42,000
	Paid in Capital - Excess of Par (168,000 + 315,200 - 42,000)		$441,200
	(To record the excercise of stock option on 8,400 stock at $20)

Jan 1 , 2023	Paid in Capital - Stock option ($394,000 - $315,200)	$78,800
	Paid in Capital from expired stock		$78,800
	(To record the paid in capital - Stock option for 2023)

Thank you..

I hope I was able to help you..

ekkarill92 answered 2 years ago

On January 1, 2016, Vaughn Corporation granted 10,300 options to key executives. Each option allows the...

On January 1, 2016, Vaughn Corporation granted 10,300 options to key executives. Each option allows the executive to purchase one share of Vaughn’s $5 par value common stock at a price of $21 per share. The options were exercisable within a 2-year period beginning January 1, 2018, if the grantee is still employed by the company at the time of the exercise. On the grant date, Vaughn’s stock was trading at $26 per share, and a fair value option-pricing model...

On January 1, 2017, Cullumber Corporation granted 18,300 options to key executives. Each option allows the...

On January 1, 2017, Cullumber Corporation granted 18,300 options to key executives. Each option allows the executive to purchase one share of Cullumber’ common shares at a price of $26 per share. The options were exercisable within a two–year period beginning January 1, 2019, if the grantee was still employed by the company at the time of the exercise. On the grant date, Cullumber’s shares were trading at $22 per share, and a fair value options pricing model determined total...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives to purchase 20,000 shares of the company's $5 par value common stock. The options were granted on January 2, 2015, and were exerciseable two years after the date of grant if the grantee was still an employee of the company. The option exercise price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $400,000. What is...

On November 1, 2020, Carla Company adopted a stock-option plan that granted options to key executives...

On November 1, 2020, Carla Company adopted a stock-option plan that granted options to key executives to purchase 33,900 shares of the company’s $9 par value common stock. The options were granted on January 2, 2021, 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...

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

On November 1, 2017, Whispering Company adopted a stock-option plan that granted options to key executives to purchase 27,300 shares of the company’s $10 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...

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...

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

On November 1, 2017, Blue Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company’s $10 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...

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

On November 1, 2017, Tamarisk Company adopted a stock-option plan that granted options to key executives to purchase 24,900 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...

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

On November 1, 2017, Sandhill Company adopted a stock-option plan that granted options to key executives to purchase 28,500 shares of the company’s $10 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...

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives...

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives to purchase 20 million of the company's $1 par common shares within the next eight years, but before December 31,2020 ( the vesting date). the exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No forfeitures are anticipated. The...

Question