Question: On January 1, 2016, Microprocessing Inc. awarded a fixed compensation stock option plan to 40 executives. The plan allows each executive to buy 2,000 shares

On January 1, 2016, Microprocessing Inc. awarded a fixed compensation stock option plan to 40 executives. The plan allows each executive to buy 2,000 shares of the company's $10 par common stock for $25 a share after a four-year service period. The fair value of each option on the grant date is $12. The company expects an annual executive turnover rate of 4%. In 2017, the rate changed to 2% for the entire service period. On December 31, 2019, 60,000 options vest and the rest are forfeited. On January 5, 2020, 10 executives of Microprocessing exercised their options.

Required:

a. Prepare the journal entries for 2016 through 2019.

b. Prepare the journal entry for January 5, 2020.

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