P$15\mathrm{.}4$B $($LO $3)($Stock$-$Based Compensation$)$ Assume that TPL has a stock$-$option plan for top

management. Each stock option represents the right to purchase a share of TPL $$1$ par value common

stock in the future at a price equal to the fair value of the stock at the date of the grant. TPL has $75,000$

stock options outstanding, which were granted at the beginning of $2025.$ The following data relate to the

option grant:

Exercise price for options

Market price at grant date $($January $1,2025)$

Fair value of options at grant date $($January $1,2025)$

Service period

Instructions

a$.$ Prepare the journal entry$($ies$)$ for the first year of the stock$-$option plan.

b$.$ Prepare the journal entry$($ies$)$ for the first year of the plan assuming that, rather than options, $2,500$

shares of restricted stock were granted at the beginning of $2025.$

c$.$ Now assume that the market price of TPL stock on the grant date was $$35$ per share. Repeat the

requirements for $($a$)$ and $($b$).$

d$.$ TPL would like to implement an employee stock$-$purchase plan for rank$-$and$-$file employees, but it

would like to avoid recording expense related to this plan. Which of the following provisions must

be in place for the plan to avoid recording compensation expense?

Substantially all employees may participate.

The discount from market is small $($less than $5\%).$

The plan offers no substantive option feature.

There is no preferred stock outstanding.