Question $12(10$ points$)$

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Big$-$Funds Ltd$.$ granted stock options to executives in early $2023.$ The stock options vest over four years and expire after six years. In total, the options allow the purchase of $40,000$ shares at $$10$ per share. Option pricing models indicate that the options have a total fair value of $$600,000.$ Estimates of retention are $80\%$ at the end of $2023$ and $75\%$ at the end of $2024.$

Required:

a$)$ Provide the journal entries to be recorded with respect to the options at the end of $2023$ and $2024.$

b$)$ What would the balance be in the equity account for stock options at the end of the forth year if retention remained at $70\%?$

c$)$ Assume that actual retention was $70\%,$ and the options were exercised at the end of the fourth year when the market price of common shares is $$25.$ Provide the entry for exercise.

d$)$ Assume that retention was $70\%$ but the options were allowed to lapse after six years when the price of common shares is $$4.$ Provide the entry for the lapse.

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