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Prepare necessary journal entries for compensation expense

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Question - Cardinal Corporation adopted a stock option plan granting 16,000 options to key executives. Each option allows the executive to purchase one share of Cardinal's $2 par value common stock at a price of $32 per share. Additional information follows:

The stock option plan was created on January 1, 2019.

A fair value option-pricing model determines total compensation to be $720,000.

The options were granted to the executives on January 1, 2020. At this date the fair value of the common stock was $40 per share.

The options can be exercised beginning January 1, 2023.

The stock option plan expires December 31, 2025.

On June 1, 2023, 12,000 options were exercised. At this date the fair value of the common stock was $42 per share. Please prepare the necessary journal entries for compensation expense and the exercise of the options (9 points). For credit please show computations.

Reference no: EM132859539

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