Presented below is information related to a stock option plan of Ensor Materials Inc.:
1). On 10/15/05, the board of directors approved a stock plan for key executives to purchase 20,000 shares of the company's $1 par value common stock.
2). On 1/1/06, 20,000 stock options were granted to managers. The exercise price of option was set at $12. The options were non-transferable and the managers must be employed within the company for three years after the date of grant in order to exercise the option. The options were exercisable between 1/1/2009 and 12/31/2011. It is assumed that the options were amortized equally for three-year service periods. The fair value of the 20,000 options is $6 per option.
3). At 4/1/07, 2,000 option shares were forfeited when one manager resigned from the company. The market value of common stock was $35 per share on this date.
4). At 3/31/10, 12,000 option shares were exercised when the market value of the common stock was $40 per share.
5). The remaining 6,000 option shares were expired at 1/1/2012 after managers decided not to exercise their options.
Instruction:
Prepare the necessary journal entries for stock option transactions above.