Breezy Lodge Issued 25,000 At-The-Money Stock Options to Its Management

question 12

Essay

Breezy Lodge issued 25,000 at-the-money stock options to its management on January 1, 2021. These options vest on January 1, 2024. Breezy's share price was $18 on the grant date and $25 on the vesting date. Estimates of the fair value of the options showed that they were worth $4 on the grant date and $11 on the vesting date. On the vesting date, management exercised all 25,000 options. Breezy has a December 31 year-end.
Required:
Record all of the journal entries relating to the stock options.

---

Definitions:

Raw Material

Basic substances in their natural, modified, or unprocessed states, used in the production or manufacturing of goods.

Direct Labor

The labor costs directly tied to the production of goods or services, such as wages for employees on the production line.

Direct Labor Rate Variance

The difference between the actual cost of labor per hour and the standard cost, multiplied by the total hours worked, used to assess labor cost management.

Standard Hours

Standard hours refer to the set amount of time expected to complete a task or job based on efficiency standards.