accounting question Transactions on stock options On January 1, 2014 options wer

Question

accounting question Transactions on stock options On January 1, 2014 options were granted to five executives whereby each might purchase 18,000 shares of the company's $10 par value common stock at $0 per share. A fair value option-pricing model determinates total compensation expense to be $1,900,000. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options were exercisable within a 5-year period beginning January 1, 2016. The service period for this award is 2 years. It is assumed that the options were for services performed equally in 2014 and 2015. On February 1, 2016 four executives exercised their options. Prepare the necessary entries on January 1, 2014 December 31, 2014 February 1, 2016 If no entry is needed, write ''No entry necessary.''

Explanation / Answer

There is no entry needed on the grant date that is Jan 1 2014.

31-Dec-14 Compensation Expense 950000 Additional paid in capital, stock options 950000 31-Dec-15 Compensation Expense 950000 Additional paid in capital, stock options 950000 1-Feb-16 Cash 2880000 Additional paid in capital, stock options 1520000 Common Stock 720000 Additional paid in capital, common stock 3680000

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