Question

On January 1, 2020, the stockholders of Cery, Inc. adopted a stock option plan for top...

On January 1, 2020, the stockholders of Cery, Inc. adopted a stock option plan for top executives
whereby each executive might receive rights to purchase up to 15,000 shares of common stock at $40
per share. The par value is $10 per share.
On January 1, 2021, options were granted to five executives to purchase 15,000 shares each. The
exercise period for these options begins on January 1, 2023, and each grantee executive had to remain
an employee of the company through December 31, 2022 (the end of the service period) to be able to
exercise any of the options. The options expire on January 1, 2033. The Black-Scholes option pricing
model determines total compensation expense for all 75,000 of these options granted to be
$1,800,000.
On February 28, 2023, the executives exercised a total of 25,000 options when Cery’s stock was
trading at $72 per share.
Required:
Show Cery’s journal entries for each of the following dates using the fair value method of accounting
for stock options. If no entry is needed, so state and explain why not:
a. January 1, 2020
b. January 1, 2021
c. December 31, 2021
d. December 31, 2022
e. January 1, 2023
f. February 28, 2023

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