Question - Issuance, Exercise, and Termination of Stock Options
On January 1, 2009, Scooby Corporation granted 10,000 options to key executives. Each option allows the executive to purchase one share of Scooby' $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2011, if the grantee is still employed by the company at the time of the exercise. On the grant date, Scooby' stock was trading at $25 per share, and a fair value option-pricing model determines total compensation to be $450,000.
On May 1, 2011, 9,000 options were exercised when the market price of Scooby' stock was $30 per share. The remaining options lapsed in 2013 because executives decided not to exercise their options.
Prepare the necessary journal entries related to the stock option plan for the years 2009 through 2013.