1. On 1/1/17, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 18,000 shares of common stock at $35 per share. The par value is $10 per share.

2. On 2/1/17, options were granted to each of five executives to purchase 18,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/19. It is assumed that the options were for services performed equally in 2017 and 2018. The Black-Scholes option-pricing model determines total compensation expense to be $1,860,000.

3. At 2/1/19, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.

Prepare the necessary entries from 1/1/17-2/1/19 for the following events using the fair value method.

Answer rating: 100% (QA)

Answer 1 Journal entries On 1st January 2017 No entry is required on granting the options since it d... View the full answer