ISU Corp. adopted a stock option plan on November 30, 2011, that designated 70,000 common shares as available for the granting of options to officers of the corporation at an exercise price of $8 a share. The market value was $12 a share on November 30, 2011.
On January 2, 2012, options to purchase 28,000 shares were granted to President Don Pedro: 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 Beatrice Leonato: 7,000 for services to be rendered in 2010, and 7,000 for services to be rendered in 2013. The shares' market value 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 value of the options was estimated at $400,000 at that time. In 2012, neither the president nor the vice-president exercised their options because the shares' market price was below the exercise price. The shares' market value was $7 a share on December 31, 2013, when the options for 2012 services lapsed.
On December 31, 2014, both the president and vice-president exercised their options for 13,000 and 7,000 shares, respectively, when the market price was $16 a share. The company's year-end is December 31.
Instructions
Prepare the necessary journal entries in 2011 when the stock option plan was adopted, in 2012 when the options were granted, in 2013 when the options lapsed, and in 2014 when the options were exercised.