Question

In: Accounting

Ivanhoe Company adopted a stock-option plan on November 30, 2016, that provided that 67,900 shares of...

Ivanhoe Company adopted a stock-option plan on November 30, 2016, that provided that 67,900 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $8 a share. The market price was $13 a share on November 30, 2017. On January 2, 2017, options to purchase 26,100 shares were granted to president Tom Winter—13,800 for services to be rendered in 2017 and 12,300 for services to be rendered in 2018. Also on that date, options to purchase 13,200 shares were granted to vice president Michelle Bennett—6,600 for services to be rendered in 2017 and 6,600 for services to be rendered in 2018. The market price of the stock was $13 a share on January 2, 2017. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $5 per option. In 2018, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $7 a share on December 31, 2018, when the options for 2017 services lapsed. On December 31, 2019, both president Winter and vice president Bennett exercised their options for 12,300 and 6,600 shares, respectively, when the market price was $15 a share. Prepare the necessary journal entries in 2016 when the stock-option plan was adopted, in 2017 when options were granted, in 2018 when options lapsed, and in 2019 when options were exercised.

List of Accounts:

Bond Conversion Expense
Bonds Payable
Cash
Compensation Expense
Common Stock
Convertible Preferred Stock
Debt Conversion Expense
Discount on Bonds Payable
Income Summary
Incremental Cash
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Liability under Stock Appreciation Plan
No Entry
Paid-in Capital in Excess of Par - Common Stock
Paid-in Capital in Excess of Par - Preferred Stock
Paid-in Capital-Expired Stock Options
Paid-in Capital-Stock Options
Paid-in Capital-Stock Warrants
Premium on Bonds Payable
Preferred Stock
Retained Earnings
Unamortized Bond Issue Costs
Unearned Compensation

Solutions

Expert Solution

Date

Accounts Titles

Debit

Credit

2016

No Journal Entry is required to be recorded at the time stock options plan was adopted

2017

Jan 2, 2017

No Entry

Dec 31, 2017

Compensation Expense (13,800 + 6,600 shares @ $5 )

102000

     Paid In Capital- Stock Options

102000

Dec 31, 2018

Compensation Expense (12,300 + 6,600 Shares @ $5)

94500

      Paid In Capital- Stock Options

94500

Dec 31, 2018

Paid In Capital- Stock Options

102000

    Paid In Capital form Expired stock Options

102000

Dec 31, 2019

Cash (12,300 + 6,600 shares @ $8)

151200

Paid In Capital- Stock Options

94500

   Common Stock (12,300 + 6,600 shares @ $ 5)

94500

   Paid In Capital- Excess of Par

151200


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