Berg Company adopted a stock-option plan on November 30, 2011, that provided that 70,000 shares of $5

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Berg Company adopted a stock-option plan on November 30, 2011, that provided that 70,000 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $12 a share on November 30, 2012.

   On January 2, 2012, options to purchase 28,000 shares were granted to president Tom Winter—15,000 for services to be rendered in 2012 and 13,000 for services to be rendered in 2013. Also on that date, options to purchase 14,000 shares were granted to vice president Michelle Bennett—7,000 for services to be rendered in 2012 and 7,000 for services to be rendered in 2013. The market price of the stock was $14 a share on January 2, 2012. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $4 per option.

   In 2013, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $8 a share on December 31, 2013, when the options for 2012 services lapsed.
   On December 31, 2014, both president Winter and vice president Bennett exercised their options for 13,000 and 7,000 shares, respectively, when the market price was $16 a share.

Instructions
Prepare the necessary journal entries in 2011 when the stock-option plan was adopted, in 2012 when options were granted, in 2013 when options lapsed, and in 2014 when options were exercised.

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Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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