Solution:
Dec 31 2013
Compensation Expenses $200,000
Paid in Capital- Stock Options $200,000
*To record compensation expense for 2013
Computation-Compensation Expense= 400,000/2= $200,000
Dec 31 2014
Compensation Expenses $200,000
Paid in Capital- Stock Options $200,000
*To record compensation expense for 2013
Computation- Compensation Expense= 400,000/2= $200,000
Dec 31 2015
Cash $240,000
Paid in Capital- Stock Options $320,000
Common Stock $40,000
Paid in capital – in excess of par common stocks $520,000
*To record stock option for 5 years and market price $30 with a balance record in the PIC in excess of common stock, 8,000 option exercised out of 10,000
Computation-
PIC- stock options- 400,000 X 80%= $320,000
Common stock = 8,000 X 5 per share= $40,000
80%= amount of stock options redeemed.
8,000/10,000= 80%
Dec 31, 2017
PIC- stock options $80,000
PIC- Expired Stock Options $80,000
*To record paid in capital- stock option for 2017 which is $80,000
Computation= 400,000 X 20%= $80,000
20% = amount of stocks that were not redeemed.
