Question

Can you provide the journal entry only for the exercise of stock options? Do not provide the other journal entries.

On 1/1/20, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 30,000 shares of common stock at $40 per share. The par value is $10 per share. On 2/1/20, options were granted to each of five executives to purchase 30,000 shares. The options expire on 2/1/22. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes option pricing model determines total compensation expense to be $3,200,000.  At 2/1/22, four executives exercised their options.

Answer 1

Date	General Journal	Debit	Credit
1/1/20	No Entry
2/1/20	No Entry
12/31/20	Compensation Expense	$1,600,000
	Paid-in Capital—Stock Options		$1,600,000
12/31/21	Compensation Expense	$1,600,000
	Paid-in Capital—Stock Options		$1,600,000
2/1/22	Cash (4 × 30,000 × $40)	$4,800,000
	Paid-in Capital—Stock Options ($3,200,000 x 4/5)	$2,560,000
	Common Stock (4 × 30,000 × $10)		$1,200,000
	Paid-in Capital in Excess of Par		$6,160,000
2/1/22	Paid-in Capital—Stock Options	$640,000
	Paid-in Capital from Expired Stock Options		$640,000