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Rutter Inc. granted 300,000 stock options to executives and employees on January 1, 2017. The options...

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Accounting

Rutter Inc. granted 300,000 stock options to executives andemployees on January 1, 2017. The options have a strike price is$10 per share and expire in 2019. The par value of the common stockis $1. Using an option pricing model, the company calculates a fairvalue of $20 per share. The expected service period, or benefitperiod, is 3 years.

a. Prepare the journal entries for 2017 and 2018.

b. In 2019, 30% of the options are exercised and the remainingoptions expire.

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