On January 1, 2016, Microprocessing Inc

question 147

Essay

On January 1, 2016, Microprocessing Inc. awarded a fixed compensation stock option plan to 40 executives. The
plan allows each executive to buy 2,000 shares of the company's $10 par common stock for $25 a share after a four- year service period. The fair value of each option on the grant date is $12. The company expects an annual
executive turnover rate of 4%. In 2017, the rate changed to 2% for the entire service period. On December 31,
2019, 60,000 options vest and the rest are forfeited. On January 5, 2020, 10 executives of Microprocessing exercised their options.
Required:
a. Prepare the journal entries for 2016 through 2019.
b. Prepare the journal entry for January 5, 2020.

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Definitions:

Halo Effect

The phenomenon where a positive impression in one area influences one's perception in other areas.

Primacy Effect

The tendency to remember information at the beginning of a list better than information in the middle or end.

Horn Effect

A cognitive bias causing negative traits or experiences with an individual to influence overall perception of them disproportionally.

Recency Effect

is the cognitive phenomenon where the most recently presented items or experiences are more likely to be remembered than those presented earlier.