Reference no: EM132727886

Novak Inc. has an executive stock option plan, details of which follow:

• The plan entitles the President to purchase 49,600 common shares at $51.40 after a two-year vesting period that begins on the grant date of January 1, 2020.
• The President can exercise the stock options any time between January 1, 2022 and December 31, 2026.
• The President exercises 40,600 of the stock options on June 30, 2022. The rest of the options are allowed to lapse

The shares' market prices per share are as follows:

January 1, 2020 $51.40

December 31, 2020 $56.50

December 31, 2021 $59.30

June 30, 2022 $63.10

• Novak uses an option-pricing model to value the stock options. When granted, the options are estimated to have a fair value of $10.10 each. This estimate remains unchanged during the vesting period.

Problem 1: Assuming that Novak has a December 31 year end, draft the required journal entries as at the following dates. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a) January 1, 2020 (grant date)

(b) December 31, 2020

(c) June 30, 2022 (exercise date)

(d) January 1, 2027 (lapse date)