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QUESTION 1 In order to retain certain key executives, ensen Corporation granted them incentive stock options on January 1, 2018. 100,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2018 $46 per share December 31, 2019 51 per share The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2018. The Black-Scholes option pricing model determines total compensation expense to be $1,000,000. The executives exercised 85 percent of the options on July 20, 2020. Required: Prepare the journal entries to record the following using the fair value method. 1. Adjusting entry to record compensation expense on December 31, 2018 and 2019. 2. Exercise and forfeiture of stock options on July 20, 2020