On July 1, 2014, Allied Material Company adopted a stock option plan that granted options to key executives to purchase 100,000 shares of the company’s $1 common stock. The options were granted on January 1, 2015, and were exercisable 3 years after the date of grant if the grantee was still an employee of the company. The options expired 4 years from date of grant. The option price was set at $66, and the fair value option-pricing model determines the total compensation expense to be $660,000.
All of the options were exercised February 1, 2018, when the market price was $78 a share.
Instructions
Prepare journal entries relating to the stock option plan for the years 2014 through 2018. Assume that the employee performs services equally in 2015, 2016, and 2017.
