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On January 1, 2018, AAA granted stock options for 60,000 shares of its $10 par value...

On January 1, 2018, AAA granted stock options for 60,000 shares of its $10 par value common
stock to its key employees. The market price of the common stock on that date was $23 per share
and the option price was $20. The Black-Scholes option pricing model determines total
compensation expense to be $630,000. The options are exercisable beginning January 1, 2021,
provided those key employees are still in AAA’s employ at the time the options are exercised. The
options expire on January 1, 2022. Prepare adjusting journal entries, if any, to recognize stock
options in 2020.

Business   Accounting   
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Answer #1
Date Account Titles Debit Credit
Jan 1 2018 No Entry when granting
Dec. 31, 2018 Compensation Expense ($630000 x 1/2) 315000
    Paid-in-Capital - Stock Options 315000
Dec. 31, 2019 Compensation Expense ($630000 x 1/2) 315000
    Paid-in-Capital - Stock Options 315000
jan 1 2021 Cash (60000x $23) 210000
Paid-in-Capital - stock Options 630000
     Common Stock (60000 x $10) 600000
     Paid-in Capital in Excess of Par-Common 240000

in the given question we have not give on jan 2021 how many shares excesied , so i assume that total 60000 shares wil excersied.

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