Question

     On January 1, 2020, the shareholders of Bell Inc. adopted a stock option plan for its top executives, where each could receive rights to purchase up to 3,000 common shares at $ 40 per share. At this date, the shares were trading for $ 32 per share.

2.   On February 1, 2020, options were granted to five executives to purchase 3,000 shares each. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on February 1, 2022. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes option pricing model determined total compensation expense to be $ 390,000.

3.   On January 31, 2022, four executives exercised their options. The fifth executive chose not to exercise her options, which therefore were forfeited.

Prepare the necessary entries from January 1, 2020 to February 1, 2022 for the above events. If no entry is needed, write "No entry necessary."

Answer 1

	DATE	PARTICULARS	DEBIT	CREDIT
1	Jan 1, 2020	No entry necessary
2	Feb 1, 2020	No entry necessary
Dec 31, 2020	Compensation expense($390,000/2)        Contributed surplus-stock options	195,000	195,000
Dec 31,2021	Compensation expense        Contributed surplus-stock options	195,000	195,000
3	Jan 31, 2022	Cash (4*3000*$40) Contributed surplus- Stock options($390,000*4/5)        Common shares	480,000 312,000	792,000
Contributed surplus- Stock options($390,000-$312,000)        Contributed surplus- Expired stock options	78,000	78,000