On January 1,2015,Gilmore Inc

question 49

Essay

On January 1,2015,Gilmore Inc.granted stock options to officers and key employees for the purchase of 100,000 of the company's no par value common shares at $28 each.The options were exercisable within a five-year period beginning January 1,2017 by grantees still in the employ of the company,and they expire December 31,2021.The market price of Gilmore's common share was $20 per share at the date of grant.Using the Black-Scholes option pricing model,the company estimated the value of each option on January 1,2015 to be $4.00.
On March 31,2017,60,000 options were exercised when the market value of common stock was $44 per share.The remainder of the options expired unexercised.The company has a December 31 year-end.
Required:
Record the journal entries for Gilmore's stock options.

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Definitions:

Required Rate Of Return

The minimum annual percentage return an investor expects to achieve by investing in a particular asset.

Internal Rate Of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Required Discount Rate

The minimum expected rate of return on an investment, used in the discounting process of present value calculations.