What is the journal entry to record stock option compensation expense when the stock options are granted?
When the stock options are granted, the total stock option compensation expense is calculated as the fair market value of the stock options x the number of options granted.
The company would debit stock option compensation expense and credit “equity APIC – stock option”. The reason that the credit is to equity is because issuing stock options increases the amount of common stock owned by shareholders.
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What is a service period or vesting period for stock options?
The service or vesting period is the difference between the grant date and exercise date. For example, if a company issued stock options to an employee, but they had to remain with the company for 3 years, the service or vesting period would be 3 years.
What is the journal entry to record stock options being exercised?
The visual below illustrates the two key activities that must be performed. First, you have to figure out how to record the stock option expense during the vesting period. Next, you need to figure out what entry is needed when the stock options are exercised. For example, on January 1, Year 1, Thayer Robotics granted […]