Its American Optical Corporation – stock options – 

E 19-5 Stock option,Its American OpticalCorporation provides a variety of share-based compensation plans to itsemployees.,Under its executive stockoption plan, the company granted options on January 1, 2011, that permitexecutives to acquire 4 million of the company’s $1 par common shares withinthe next five years, but not December 31, 2012 (the vesting date).,The exercise price is the market price of theshares on the date of grant, $14 per share.,The fair value of the 4 million options, estimated by an appropriateoption pricing model, is $3 per option.,No forfeitures are anticipated.,Ignore taxes.,Required:,1. Determine the total compensation cost pertaining to theoptions.,2. Prepare the appropriate journal entry to record the awardof options on January 1, 2011.,3. Prepare the appropriate journal entry to recordcompensation expense on December 31, 2011.,4. Prepare the appropriate journal entry to recordcompensation expense on December 31, 2012.

Dolton Corporation – Long term liabilities – 

The adjusted trial balance for Dolton Corporation at the endof the current year contained the following accounts:,Bonds payable, 10% $400,000,Bond interest payable 20,000,Discount on bonds payable 30,000,Notes payable, 9%, due 2010 70,000,Accounts payable 120,000,Instructions,(a) Prepare the long-term liabilities section of the balancesheet.,(b) Indicate the proper balance sheet classification for theaccounts listed above that do not belong in the long-term liabilities section.

Magnetic-Optical Corporation – Restricted stock award plan; forfeitures anticipated – 

E 19-4 Restricted stock award plan; forfeitures anticipated,Magnetic-Optical Corporation offers a variety of share-basedcompensation plans to employees. Under its restricted stock award plan, thecompany on January 1, 2011, granted 4 million of its $1 par common shares tovarious division managers.,The sharesare subject to forfeiture if employment is terminated within three years.,The common shares have a market price of22.50 per share on the grant date.,Restricted:,1. Determine the total compensation cost pertaining to therestricted shares.,2. Prepare the appropriate journal entry to record the awardof restricted shares of January 1, 2011.,3. Prepare the appropriate journal entry to recordcompensation expense on December 31, 2011.,4. Suppose Magnetic-Optical expected a 10% forfeiture rateon the restricted shares prior to vesting.,Determine the total compensation cost.