Determine the total compensation cost

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Problem - Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2021, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2024, and expire December 31, 2025. Each option has a fair value of $1 based on an option pricing model.

(1) Determine the total compensation cost pertaining to the options. Show calculations.

(2) Prepare the appropriate journal entry to record compensation expense for the year 2021.

(3) 54,000 shares of options are exercised on April 15, 2024. The market price is $8 per share. Prepare the appropriate journal entry to record this transaction.

Reference no: EM132966401

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