Question: On November 1 2011 Columbo Corp adopted a stock option

On November 1, 2011, Columbo Corp. adopted a stock option plan that granted options to key executives to purchase 45,000 common shares. The options were granted on January 2, 2012, and were exercisable two years after the date of grant if the grantee was still a company employee; the options expire six years from the date of grant. The option price was set at $42 and, using an options pricing model to value the options, the total compensation expense was estimated to be $550,000. Note that the calculation did not take into account forfeitures.
On April 1, 2012, 3,500 options were terminated when some employees resigned from the company. The market value of the shares at that date was $28. All of the remaining options were exercised during the year 2013: 31,500 on January 3 when the market price was $52, and 10,000 on May 1 when the market price was $58 a share. Assume that the entity follows PE GAAP and has chosen not to reflect forfeitures in their upfront estimate of compensation expense.
(a) Prepare journal entries relating to the stock option plan for the years 2011, 2012, and 2013. Assume that the employees perform services equally in 2011 and 2013, and that the year end is December 31.
(b) What is the significance of the fact that the pricing model did not take into account forfeitures? Would taking expected forfeitures into account make the estimate of the total compensation expense higher or lower?
(c) List the types of stock compensation plans and when they might be used.
(d) How are employee and compensatory option plans different from other options?

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