On January 1, 2021, Ayayai Inc. granted stock options to officers and key employees for the purchase of 18,000 shares of the company’s $10 par common stock at $27 per share. The options were exercisable within a 5-year period beginning January 1, 2023, by grantees still in the employ of the company, and expiring December 31, 2027. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $379,600. On April 1, 2022, 2,000 options were terminated when the employees resigned from the company. The market price of the common stock was $35 per share on this date. On March 31, 2023, 12,000 options were exercised when the market price of the common stock was $40 per share.
Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2021, 2022, and 2023.

1/1/2021            No entry

12/31/2021    Compensation Expense                                        189,800

                     Paid-in Capital-Stock Options                               189,800

                     ($379,600 × 1/2)

                     (To recognize compensation expense for 2021)

4/1/2022       Paid-in Capital-Stock Options                                21,088.89

                     Compensation Expense                                         21,088.89  

                     ($189,800 × [2,000 ÷ 18,000])

                     (To record termination of stock  options held by resigned employees)

12/31/2022   Compensation Expense                                          170,820

                     Paid-in Capital-Stock Options                                 170,820

                     ($379,600 × 1/2 × 18/20)

                     (To recognize  compensation expense for 2022)

3/31/2023     Cash (12,000 × $27)                                              324,000

                     Paid-in Capital-Stock Options                              253,066.67

                     ($379,600 × [12,000 ÷ 18,000])

                     Common Stock                                                      120,000

                     Paid-in Capital in Excess of Par                            457,066.67

                     (To record exercise of stock options)

Explanation:

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