On January 1, 2019, Grouper Corporation granted 10,800 options to key executives. Each option allows the executive to purchase one share of Grouper'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, Grouper's stock was trading at $26 per share, and a fair value option-pricing model determines total compensation to be $431,000. On May 1, 2021, 7,440 options were exercised when the market price of Culver's stock was $30 per share. The remaining options lapsed in 2020 because executives decided not to exercise their options.

Required:

Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2021.

Question

Arthur Barrera

Business

15 September, 20:42

On January 1, 2019, Grouper Corporation granted 10,800 options to key executives. Each option allows the executive to purchase one share of Grouper'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, Grouper's stock was trading at $26 per share, and a fair value option-pricing model determines total compensation to be $431,000. On May 1, 2021, 7,440 options were exercised when the market price of Culver's stock was $30 per share. The remaining options lapsed in 2020 because executives decided not to exercise their options.

Required:

Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2021.

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Answers (1)

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Gavyn Sharp · Answer 1

01-01-2019 no entry

31-12-2019

Dr Compensation expense ($431,000/2) $215,500

Cr Paid in capital - Stock options $215,500

31-12-2020

Dr Compensation expense ($431,000/2) $215,500

Cr Paid in capital - Stock options $215,500

31-12-2021

Dr Cash (7,440*$20) $148,800

Dr Paid in capital - Stock options (431,000 * (7,440/10,800)) $296,911

Cr Common stock (7440*$5) $37,200

Cr Paid in capital - in excess of par $408,511

01-01-2021

Dr Paid in capital - Stock option (431,000-296,911) 134,089

Cr Paid in capital from expired stock 134,089