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On January 1, 2018 Algarin Company granted the CEO of the organization, a stock option to...

  1. On January 1, 2018 Algarin Company granted the CEO of the organization, a stock option to buy 500 shares of for $20 per share, the par value is $15 a share, and market value is $35 a share. The option is exercisable for 5 years from 1/1/18. Using a fair value option pricing model, total compensation expense is determined to be $6,000 and the service period if for two years.

  1. Record the journal entries for 1/1/18, 12/31/18, and 12/31/19.
  2. The CEO exercised the options on 1/1/20. Record the entry.

2. Algarin Corporation had 800,000 shares of common stock outstanding at December 31, 2018. In addition, it had 150,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of Algarin’s stock at an option price of $37 per share. The average market price of Algarin's common stock for 2018 was $50. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2018?

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