Prepare journal entries relating to the stock option plan

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Question

On November 1, 2017, Sandhill Company adopted a stock-option plan that granted options to key executives to purchase 38,400 shares of the company's $9 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 $576,000.

All of the options were exercised during the year 2020: 25,600 on January 3 when the market price was $64, and 12,800 on May 1 when the market price was $75 a share.

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.

Reference no: EM132386830

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