On January 1, 2007, Draper Hardware Company established a stock-based compensation plan for its senior employees. A

Question:

On January 1, 2007, Draper Hardware Company established a stock-based compensation plan for its senior employees. A total of 75,000 options was granted that permit employees to purchase 75,000 shares of $2 par common stock at $37 per share. Each option had a fair value of $6 on the grant date. Options are exercisable beginning on January 1, 2010, and can be exercised anytime during 2010. The market price for Draper common stock on January 1, 2007, was $40.

Assume that all options were exercised on December 31, 2010. Prepare all entries required for the years 2007–2010.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...