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(Solved) (Latest ver. Aug 2020) - Issuance, Exercise, and Termination of Stock Options

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Question:

On January 1, 2008, Titania Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company's $10 par common atock at $25 per share. The options were exercisable within a 5 year period beginning Jan. 1, 2010, by grantees still in the employ of the company, and expiring Dec. 31, 2014. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $350,000.

On April 1, 2009, 2,000 option shares were terminated when the employees resigned from the company. The market value of the common stock was $35 per share on this date.

On March 31, 2010, 12,000 option shares were exercised when the market value of the common stock was $40 per share.

Instructions:
Prepare journal entries using the fair value method to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended Dec. 31, 2008, 2009 & 2010.

 







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