Question - Mouse Corp. issued 10,000 stock options to its top 5 executives on January 1, 2014. The options have an exercise price of $50 per share, and are exercisable between January 1, 2016 and December 31, 2017. The stock price on the date of issue was $42.
Assume the options have an estimated fair market value on January 1, 2014, of $3 each. On December 31, 2014, the options had a value of $13 (and the stock price of Mouse was $53). On December 31, 2015, the stock price of mouse was $54 and the options were worth $5.50 each. On January 4, 2016, all the options were exercised when the stock price of Mouse was $55.
Show journal entries (if any) needed on January 1, 2014; December 31, 2014; December 31, 2015; and January 4, 2016. Assume no turnover among the executives receiving options. Common stock has no par value assigned.