Accounting for Dilutive securities and Earning per share.
On November 1, 2017, Larkspur Company adopted a stock-optionplan that granted options to key executives to purchase 30,000shares of the company’s $10 par value common stock. The optionswere granted on January 2, 2018, and were exercisable 2 years afterthe date of grant if the grantee was still an employee of thecompany. The options expired 6 years from date of grant. The optionprice was set at $30, and the fair value option-pricing modeldetermines the total compensation expense to be $450,000.
All of the options were exercised during the year 2020: 20,000 onJanuary 3 when the market price was $69, and 10,000 on May 1 whenthe market price was $78 a share.
Prepare journal entries relating to the stock option plan for theyears 2018, 2019, and 2020. Assume that the employee performsservices equally in 2018 and 2019.
