On January 1, 2014, Lazer Corp. granted stock options to officers and key employees

On January 1, 2014, Lazer Corp. granted stock options to officers and key employees

Problem 1
On January 1, 2014, Lazer Corp. granted stock options to officers and key employees
for the purchase of 250,000 shares of the company’s $1 par common stock at $86
per share. The options were exercisable within a 5-year period beginning January 1,
2016, by grantees still in the employ of the company, and expiring December 31,
2020. The service period for this award is 2 years. Assume that the fair value option
pricing model determines total compensation expense to be $1,250,000.
On July 1, 2014, 20,000 option shares were terminated when the employees
resigned from the company. The market value of the common stock was $88 per
share on this date.
On March 31, 2016, 130,000 option shares were exercised when the market value of
the common stock was $91 per share.
Instructions
Prepare journal entries to record issuance of the stock options, termination of the
stock options, exercise of the stock options, and charges to compensation expense,
for the years ended December 31, 2014, 2015, and 2016.

Problem 2:

The information below pertains to Riley Company for 2015.
Net income for the year
$8,670,000
6% convertible bonds issued at par ($1,000 per bond);
each bond is convertible into 60 shares of common stock
5,000,000
4% convertible, cumulative preferred stock, $100 par
value; each share is convertible into 4 shares of common stock
2,500,000
Common stock, $1 par value
9,500,000
Income Tax rate for 2015
40%
Average market price of common stock
$18 per share

There were no changes during 2015 in the number of common shares, preferred
shares, or convertible bonds outstanding. There is no treasury stock. The company
also has common stock options (granted in a prior year) to purchase 120,000 shares
of common stock at $12 per share.
Instructions

 
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