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Prepare necessary journal entries related to stock option

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Question - (Issuance, Exercise, and Termination of Stock Options) On January 1, 2016, Nichols Corporation granted 10,000 options to key executives. Each option allows the executive to purchase one share of Nichols' $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2018, if the grantee is still employed by the company at the time of the exercise. On the grant date, Nichols' stock was trading at $25 per share, and a fair value option-pricing model determines total compensation to be $400,000.

On May 1, 2018, 8,000 options were exercised when the market price of Nichols' stock was $30 per share. The remaining options lapsed in 2020 because executives decided not to exercise their options.

Instructions - Prepare the necessary journal entries related to the stock option plan for the years 2016 through 2020.

Kieso, Donald E., Jerry Weygandt, Terry Warfield. Intermediate Accounting, 16th Edition. Wiley, 2016-03-21. VitalBook file.

Reference no: EM131680024

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