On January 1, 2019, Pharoah Corporation granted 9,600 options to key executives. Each option allows the executive to purchase one share of Pharoah’s $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2021, if the grantee is still employed by the company at the time of the exercise. On the grant date, Pharoah’s stock was trading at $24 per share, and a fair value option-pricing model determines total compensation to be $399,000. On May 1, 2021, 7,680 options were exercised when the market price of Pharoah’s stock was $29 per share. The remaining options lapsed in 2023 because executives decided not to exercise their options. Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2023

Journal Entry

Explanation:

The Journal Entry is shown below:-

1. No Entry

2. Compensation expense Dr,               $199,500  

($399,000 × 1 ÷ 2)

            To paid in capital - stock option            $199,500

(Being compensation expenses is recorded)

3. Compensation expense Dr,                $199,500

             To paid in capital - stock option              $199,500

(Being compensation expenses is recorded)

3. Cash Dr,                                                $153,600

(7,680 × $20)

Paid in capital - stock option Dr,             $319,200

($399,000 × 7,680 ÷ 9,600)

              To common stock                                    $38,400

                (7,680 × $5)

               To Paid in capital in excess of par         $434,400

(Being exercise on stock option is recorded)

4. Paid in capital - stock option Dr,            $79,800

($399,000 - $319,200)

                To paid in capital from expired stock      $79,800

(Being paid in capital stock option is recorded)

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know