P16-3 (Stock-Option Plan) Berg
Company adopted a stock-option plan on November 30, 2013, that provided that 70,000
shares of $5.00 par value stock be designated as available for the granting of
options to officers of the corporation at a price of $9.00 a share. The market
price was $12.00 a share on November 30, 2014.
File name: P16-3 Berg Company.xls File type: doc PRICE: $8
On
January 2, 2014, options to purchase 28,000 shares were granted to president Tom
Winter -15,000 for services rendered in 2014 and 13,000 for services to be
rendered in 2015. Also on that date, options to purchase 14,000 shares were granted
to vice president Michelle Bennett -7,000 for services to be rendered in 2014
and 7,000 for services to be rendered in 2015. The market value of the stock
was $14 a share on January 2, 2014. 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 $4 per option.
In 2015
neither the president nor the vice president exercised their options because
the market price of the stock was below the exercise price. The market value of
the stock was $8 a share on December 31, 2015, when the options for 2014
services lapsed. On December 31, 2016 both president Winter and vice president
Bennett exercised their options for 13,000 and 7,000 shares, respectively, when
the market price was $16 a share.
Instructions
Prepare
the necessary journal entries in 2013 when the stock-option plan was adopted,
in 2014 when options were granted, in 2015 when options lapsed, and in 2016
when options were exercised.
TUTORIAL
PREVIEW
Prepare
the necessary journal entries in 2013 when the stock-option plan was adopted,
in 2014 when options were granted, in 2015 when options lapsed, and in 2016
when options were exercised.|
Dec 31, 14
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Compensation
Expense ($4.00 per share × 22,000 sh)
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88,000
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Paid-in Capital—Stock Options
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88,000
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(To
record compensation expense attributable to 2014—22,000 options at $4)
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