Using a stock-option plan, on September 16, 2017, the stockholders of Bentley Company approve a plan that grants the companys one executive the option to purchase 4,000 shares of the companys $1 par value common stock. The options are granted on January 1, 2018 and may be exercised at any time within the following five years. The option price per share is $30, and the market price of the stock at the date of grant is $40 per share.

Using the fair value method, total compensation expense is computed by applying an acceptable fair value option-pricing model. Assume that the fair value option-pricing model determines total compensation expense to be $180,000.

A. Assuming the expected period of benefit is 3 years (starting with the grant date), what is the journal entries for year one (this is the same for each of the three years).

B. If all 4,000 options are exercised on July 1, 2022, record the journal entry: