On November 1, 2022, Crane Corp. adopted a stock option plan that granted options to key executives to purchase 49,800 common shares. The options were granted on January 2, 2023, and were exercisable two years after the date of grant if the grantee was still a company employee; the options expire six years from the date of grant. The option price was set at $37, and total compensation expense was estimated to be $522,000. Note that the calculation did not take forfeitures into account. On April 1, 2024, 3,900 options were terminated when some employees resigned from the company. The fair value of the shares at that date was $25. All of the remaining options were exercised during the year 2025: 34,900 on January 3 when the fair value was $47, and 11,000 on May 1 when the fair value was $53 a share. Assume that the entity follows ASPE and has chosen not to reflect forfeitures in its upfront estimate of compensation expense. (a) Prepare journal entries relating to the stock option plan for the years 2023, 2024, and 2025. Assume that the employees perform services equally in 2023 and 2024, and that the year end is December 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,275. Do not round intermediate calculations.)
On November 1, 2022, Crane Corp. adopted a stock option plan that granted options to key executives to purchase 49,800 common shares. The options were granted on January 2, 2023, and were exercisable two years after the date of grant if the grantee was still a company employee; the options expire six years from the date of grant. The option price was set at $37, and total compensation expense was estimated to be $522,000. Note that the calculation did not take forfeitures into account. On April 1, 2024, 3,900 options were terminated when some employees resigned from the company. The fair value of the shares at that date was $25. All of the remaining options were exercised during the year 2025: 34,900 on January 3 when the fair value was $47, and 11,000 on May 1 when the fair value was $53 a share. Assume that the entity follows ASPE and has chosen not to reflect forfeitures in its upfront estimate of compensation expense. (a) Prepare journal entries relating to the stock option plan for the years 2023, 2024, and 2025. Assume that the employees perform services equally in 2023 and 2024, and that the year end is December 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,275. Do not round intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On November 1, 2022, Crane Corp. adopted a stock option plan that granted options to key executives to purchase 49,800 common
shares. The options were granted on January 2, 2023, and were exercisable two years after the date of grant if the grantee was still a
company employee; the options expire six years from the date of grant. The option price was set at $37, and total compensation
expense was estimated to be $522,000. Note that the calculation did not take forfeitures into account.
On April 1, 2024, 3,900 options were terminated when some employees resigned from the company. The fair value of the shares at
that date was $25. All of the remaining options were exercised during the year 2025: 34,900 on January 3 when the fair value was $47,
and 11,000 on May 1 when the fair value was $53 a share. Assume that the entity follows ASPE and has chosen not to reflect
forfeitures in its upfront estimate of compensation expense.
(a)
Prepare journal entries relating to the stock option plan for the years 2023, 2024, and 2025. Assume that the employees perform
services equally in 2023 and 2024, and that the year end is December 31. (Credit account titles are automatically indented when the
amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry"
for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to O decimal places, e.g. 5,275. Do
not round intermediate calculations.)
Transcribed Image Text:(a)
Prepare journal entries relating to the stock option plan for the years 2023, 2024, and 2025. Assume that the employees perform
services equally in 2023 and 2024, and that the year end is December 31. (Credit account titles are automatically indented when the
amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry"
for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to O decimal places, e.g. 5,275. Do
not round intermediate calculations.)
Date
1/2/23
12/31/23
4/1/24
12/31/24
1/3/25
5/1/25
Account Titles and Explanation
No Entry
No Entry
Compensation Expense
Contributed Surplus - Stock Options
Contributed Surplus - Stock Options
Compensation Expense
Compensation Expense
Contributed Surplus - Stock Options
Cash
Contributed Surplus - Stock Options
Common Shares
Cash
Contributed Surplus - Stock Options
Common Shares
Debit
Credit
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