Question - Issuance, Exercise, and Termination of Stock Options
On January 1, 2009, Scooby Corpora- tion granted 10,000 options to key executives. Each option allows the executive to purchase one share of Scooby's $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2011, if the grantee is still employed by the company at the time of the exercise. On the grant date, Scooby's stock was trading at $25 per share, and a fair value option- pricing model determines total compensation to be $450,000.
On May 1, 2011, 9,000 options were exercised when the market price of Scooby's stock was $30 per share. The remaining options lapsed in 2013 because executives decided not to exercise their options.
Instructions - Prepare the necessary journal entries related to the stock-option plan for the years 2009 through 2013.