The CEO of your firm has been granted 50,000 stock options to buy $1 par common stock at $50 when the price of the stock is $60. The pricing model indicates that the market value of each of the options is $18. The CEO must remain with the firm in the CEO role for 4 years and could not exercise those options until the end of year 4.

a. What is the journal entry at grant date?

b. What is the journal entry at the end of year one?

c. What would the journal entry be when 100% exercised at the end of year 4?

d. If the stock options were never exercised, what journal entry will the firm make at the end of year 4?

Answer rating: 100% (QA)

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