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  3. on january 1 of year 1, holiday inc. offered a sto

On January 1 of Year 1, Holiday Inc. offered a stock option incentive plan to...

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Accounting

On January 1 of Year 1, Holiday Inc. offered a stock option incentive plan to a top executive. The plan
provided the executive 360 stock options for Holiday Inc. $1 par value, common stock at an option price
of $15 per share through the expiration date of January 1 of Year 7. The fair value of the options based
upon an option-pricing model on January 1 of Year 1, is $10,800. The market price at year-end of Holiday
Inc. stock is $15 per share on January 1 of Year 1, and $18 on December 31 of Year 1. The requisite service
period is 3 years. The options were exercised on March 1 of Year 4, when the market price of the stock
was $20 per share.
a. Prepare the journal entry (if any) on January 1 of Year 1.
b. Prepare the adjusting journal entry on December 31 of Year 1, the company's year-end.
c. Prepare the journal entry on March 1 of Year 4.
Note: If a line in a journal entry isn't required for the transaction, select "N/Adebit" and "N/Acredit" as
the account names and leave the Dr. and Cr. answers blank (zero).
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