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On January 2, 2017, Dwyer Corporation granted 10,000nonqualified stock options each to four of its key executives(40,000 options in total). Under the terms of the option plan, uponexercise, each executive will pay the exercise price of $10 pershare of common stock ($1 par value). The options were exercisableafter January 1, 2020, and the executives were required to beemployees of Dwyer at the date of exercise. The Black–Scholes valueof the option on the grant date is $12.50. Three employeesexercised options for 30,000 shares of stock on January 2, 2021.Dwyer has a tax rate of 35% in all years. Relevant dates and stockprices are as follows:January 2, 2017$10December 31, 201719December 31, 201828December 31, 201945December 31, 202026January 2, 202126December 31, 202125Required:Prepare the compensation expense and related tax journal entriesfrom 2017 to 2019.Prepare the journal entries required to record the stock optionexercise on January 2, 2021. Include the journal entries to recordthe tax effects.Prepare a schedule to show how the January 2, 2021, optionexercise affects Dwyer’s 2021 income tax expense.