Question
In: Accounting
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 total compensation expense to be $373,500.
All of the options were exercised during the year 2020: 16,600 on
January 3 when the market price was $66, and 8,300 on May 1 when
the market price was $77 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. (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. Round intermediate
calculations to 5 decimal places, e.g. 1.24687 and final answers to
0 decimal places, e.g. 5,125.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
May 1, 2020 |
|||
Solutions
Expert Solution
The Journal Entry's for stock option plan for the year 2018, 2019 and 2020 are given below ;
| Date | Account Title and Explanation | Debit | Credit |
| Feb 1 2018 | No Entry | ||
| Dec 31 2018 | Compensation Expense Account | $ 186,750 | |
| Paid in capital stock option Account | $ 186,750 | ||
| (To record the compensation Expense) | |||
| Dec 31 2019 | Compensation Expense Account | $ 186,750 | |
| Paid in capital stock option account | $ 186,750 | ||
| ( To record the compensation Expense) | |||
| March 1 2020 | Cash | $ 498,000 | |
| Paid in capital stock option | $ 249,000 | ||
| Common Stock($16,600 * 9) | $ 149,400 | ||
| Paid in capital in excess of par | $ 597,600 | ||
| (To record the transaction of selling the common stock ) | |||
| May 1 2020 | Cash ($ 8,300 * 30 ) | $249,000 | |
| Paid in Capital Stock Option | $124,500 | ||
| Common Stock ($ 8,300 * 9 ) | $74,700 | ||
| Paid in capital in excess of par | $298,800 |
Working Notes ;
Calculation of paid in capital stock option account on 1st March 2020
Paid in capital stock option account
= $ 373,500 * 16,600 / 24,900 = $249,000
Calculation of paid in capital stock options account on 1st May 2020
Paid in capital stock option account
= $ 373,500 * 8,300 / 24,900 = $124,500
ekkarill92 answered 1 year agoRelated Solutions
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