Question: Issuance and Exercise of Stock Options On November 1 2009
(Issuance and Exercise of Stock Options) On November 1, 2009, Olympic Company adopted a stock-option plan that granted options to key executives to purchase 40,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2010, 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 $40, and the fair value option-pricing model determines the total compensation expense to be $600,000. All of the options were exercised during the year 2012: 30,000 on January 3 when the market price was $67, and 10,000 on May 1 when the market price was $77 a share. Prepare journal entries relating to the stock-option plan for the years 2010, 2011, and 2012. Assume that the employee performs services equally in 2010 and 2011.
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