LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2021. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option.

Required:

1. Prepare the appropriate entry when the options are awarded on January 1, 2021.

2. Prepare the appropriate entries on December 31 of each year 2021–2024.

3. Suppose at the beginning of 2023, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2023 and 2024.