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Find and prepare the journal entries on december

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On 1/1/2020, the stockholders of Firm ABC approve a plan that grants the company's CEO options to purchase 5,000 shares each of the company's zero par value common stock.

  • The company grants the options on January 1, 2020. The executives may exercise the options after 1/1/2022. The exercise price per share is $10, and the market price of the stock at the date of grant is $10 per share. The company computes total compensation expense by applying an acceptable fair value option-pricing model (such as the Black-Scholes option-pricing model).
  • To keep this illustration simple, we assume that the fair value option-pricing model determines the executive's total compensation expense to be $10,000. Corporate tax rate is 20%. Income Tax Expense for 2020, 2021, and 2022 is $50,000, and Income Taxes Payble for 2020 and 2021 is $51,000.

Problem 1: Prepare journal entries on 12/31/2020 and 12/31/2021.

Reference no: EM132643989

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