Final answer:
The question is on the college-level business topic of accounting for stock-based compensation, specifically how Ogden records compensation expense associated with stock options over several years.
Step-by-step explanation:
The subject of this question is accounting for stock-based compensation, which falls under the broader category of Business. The grade level is likely College, as this content is typically covered in undergraduate or graduate accounting courses.
The scenario described concerns the recording of compensation expense related to stock options over a period of four years. The initial journal entry debits Compensation Expense and credits Unearned Compensation to reflect the commitment to pay employee compensation in the form of equity.
In the subsequent years, the company will recognize the compensation expense by reducing the Unearned Compensation account and debiting Compensation Expense again. This process aligns the recognition of expense with the period in which employees perform the service.