On January 1, 2020, XYZ Co. granted options to key executives to purchase 100,000 shares of the company's$10 par value Common Stock at an option price of $50 per share. The Black-Scholes option pricing modeldetermines total compensation expense to be $750,000. The options become exercisable after a 2 year serviceperiod from the date of grant.Assume all options were exercised in 2022 on the following dates:April 16, 2022– 70,000 options were exercised when the market value per share was $63September 4, 2022 – 30,000 options were exercised when the market value per share was $72Prepare a journal entry for:a) January 1, 2020b) December 31, 2020c) December 31, 2021d) April 16th, 2022e) September 4, 2022

Journal entry is a primary entry that records the financial transactions initially.

Answered: On January 1, 2020, XYZ Co. granted…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 7E

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Q. M Company issued 99,000 stock options to key executives on January 1, 2021. The options must be exercised by December 31, 2023, and will expire on January 1, 2027. Each option entitles the holder to one share of $1 par ordinary stock for $12. On the date of award, an option-pricing model estimates the fair value of the options to be $4. What should M deduct as compensation expense in 2021?
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