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Prepare the required journal entries

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Pharoah Ltd. has an executive stock option plan, details of which follow:

  1. The plan entitles the CEO to purchase 11,000 common shares at $27 each, following a vesting period.
  2. The vesting period is January 1, 2020 through December 31, 2021.
  3. The exercise period is January 1, 2022 through December 31, 2022.
  4. The CEO exercises 8,900 of the stock options on June 30, 2022. The rest of the options are allowed to lapse.
  5. The shares' market prices per share are as follows:

January 1, 2020           $27

December 31, 2020      $29

December 31, 2021      $30

June 30, 2022            $32

Pharoah uses an option-pricing model to value the stock options. When granted, the options are estimated to have a fair value of $5 each. This estimate remains unchanged during the vesting period.

Question 1: Assuming that Pharoah has a December 31 year end, prepare the required journal entries as at the following dates. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a) January 1, 2020 (grant date)

(b) December 31, 2020

(c) June 30, 2022 (exercise date)

(d) January 1, 2025 (lapse date)

Reference no: EM132463281

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