Chapter 16, Problem 3P

To determine

Issue, exercise, and termination of stock options: Stock options are given to key employees as compensation. The holders of the option are entitled to acquire shares of the corporations upon payment of a certain amount of money within a stipulated period of time. The compensation is allocated over the service period of the employee.

To prepare: To prepare journal entries when the stock-option plan was adopted, when options were granted, when options lapsed, and when options were exercised.