Blue Company adopted a stock-option plan on November 30, 2024, that provided that 73,800 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $11 a share on November 30, 2025. On January 2, 2025, options to purchase 29,900 shares were granted to president Tom Winter-15,800 for services to be rendered in 2025 and 14,100 for services to be rendered in 2026. Also on that date, options to purchase 15,000 shares were granted to vice president Michelle Bennett-7,500 for services to be rendered in 2025 and 7,500 for services to be rendered in 2026. The market price of the stock was $15 a share on January 2, 2025. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $5 per option. In 2026, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $8 a share on December 31, 2026, when the options for 2025 services lapsed. On December 31, 2027, both president Winter and vice president Bennett exercised their options for 14,100 and 7,500 shares, respectively, when the market price was $17 a share. Prepare the necessary journal entries in 2024 when the stock-option plan was adopted, in 2025 when options were granted, in 2026 when options lapsed, and in 2027 when options were exercised. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record entries in the order displayed in the problem statement.) Date Account Titles and Explanation Nov. 30, 2024 No Entry No Entry an. 2,2025 No Entry No Entry Dec. 31, 2025 Dec. 31, 2026 (To record options granted to president.) Compensation Expense Paid-in Capital-Stock Options (To record compensation expense attributable to 2025.) Compensation Expense Paid-in Capital-Stock Options (To record compensation expense attributable to 2026.) Debit 116500 110000 Credit 11650 11000

Blue Company adopted a stock-option plan on November 30, 2024, that provided that 73,800 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $11 a share on November 30, 2025. On January 2, 2025, options to purchase 29,900 shares were granted to president Tom Winter-15,800 for services to be rendered in 2025 and 14,100 for services to be rendered in 2026. Also on that date, options to purchase 15,000 shares were granted to vice president Michelle Bennett-7,500 for services to be rendered in 2025 and 7,500 for services to be rendered in 2026. The market price of the stock was $15 a share on January 2, 2025. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $5 per option. In 2026, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $8 a share on December 31, 2026, when the options for 2025 services lapsed. On December 31, 2027, both president Winter and vice president Bennett exercised their options for 14,100 and 7,500 shares, respectively, when the market price was $17 a share. Prepare the necessary journal entries in 2024 when the stock-option plan was adopted, in 2025 when options were granted, in 2026 when options lapsed, and in 2027 when options were exercised. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record entries in the order displayed in the problem statement.) Date Account Titles and Explanation Nov. 30, 2024 No Entry No Entry an. 2,2025 No Entry No Entry Dec. 31, 2025 Dec. 31, 2026 (To record options granted to president.) Compensation Expense Paid-in Capital-Stock Options (To record compensation expense attributable to 2025.) Compensation Expense Paid-in Capital-Stock Options (To record compensation expense attributable to 2026.) Debit 116500 110000 Credit 11650 11000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 5MC

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