Reference no: EM132615394

On November 1, 2017, Sweet Company adopted a stock-option plan that granted options to key executives to purchase 27,300 shares of the company's $10 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $409,500.

All of the options were exercised during the year 2020: 18,200 on January 3 when the market price was $68, and 9,100 on May 1 when the market price was $78 a share.

Problem 1: Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee performs services equally in 2018 and 2019.