Under its executive stock option plan, ABC Corp. granted 10 million options on January 1, 2021, that permit executives to purchase 10 million of the companys $1 par common shares within the next six years, but not before December 31, 2023.

• The exercise price is the market price of the shares on the date of grant, $14 per share.
• The fair value of the options as of grant date, estimated by an appropriate option pricing model, is $3 per option.
• Assume no forfeitures.

Question Required: 1. Provide the journal entry for compensation expense on December 31, 2021. 2. Provide the journal entry for compensation expense on December 31, 2022. 3. Provide the journal entry for compensation expense on December 31, 2023. 4. Suppose that all 10 million options are exercised on April 3, 2024, when the market price is $19 per share. Provide the journal entry for exercise of the options. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter all values in millions (i.e., 10,000,000 should be entered as 10). Ignore taxes throughout.) [Hint: First, calculate total compensation cost. Then, calculate compensation expense per year.]

Journal entry worksheet

1. Provide the journal entry for the compensation expense on December 31, 2021

2. Provide the journal entry for compensation expense on December 31, 2022.

3. Provide the journal entry for compensation expense on December 31, 2023.

4. Suppose that all 10 million options are exercised on April 3, 2024, when the market price is $19 per share. Provide the journal entry for exercise of the options.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
December 31, 2021