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Your answer is partially correct.Assume thatAmazon.comhas a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,000 stock options outstanding, which were granted at the beginning of 2014. The following data relate to the option grant.
Exercise price for options$40Market price at grant date (January 1, 2014)$40Fair value of options at grant date (January 1, 2014)$6Service period5 years
(a)Prepare the journal entries for the first year of the stock-option plan.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
DateAccount Titles and ExplanationDebitCredit1/1/1412/31/14
(b)Prepare the journal entries for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2012.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
DateAccount Titles and ExplanationDebitCredit1/1/1412/31/14
(c)Now assume that the market price of Amazon stock on the grant date was $45 per share. Prepare the journal entries for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2012.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
DateAccount Titles and ExplanationDebitCredit1/10/1412/31/14

 

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