On November 1, 2017, Whispering Company adopted a stock-option plan that granted

Question

On November 1, 2017, Whispering Company adopted a stock-option plan that granted options to key executives to purchase 31,800 shares of the company's $11 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 $477,000. All of the options were exercised during the year 2020: 21,200 on January 3 when the market price was $64, and 10,600 on May 1 when the market price was $75 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 O 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.) 0 DateAccount Titles and Explanation Debit Credit Jan. 3, 2020 May 1, 2020

Explanation / Answer

Date Account titles & Explanations Debit Credit 12/31/2018 Compensation expense 238500 Paid in capital-Stock options 238,500 (477000/2) 12/31/2019 Compensation expense 238500 Paid in capital-Stock options 238,500 (477000/2) 1/3/2020 Cash (21200*30) 636000 paid in capital stock options(477000/31800*21200) 318000 common stock (21,200*11) 233200 paid in capital in excess of par 720,800 5/1/2010 Cash (10600*30) 318000 paid in capital stock options(477000/31800*10600) 159000 common stock (10,600*11) 116600 paid in capital in excess of par 360,400

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