Question

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, options were granted for 72 million $1 par common shares. The exercise price is the market price on the grant date_$8 per share. Options cannot be exercised prior to January 1, 2023, and expire December 31, 2027. The fair value of the 72 million options, estimated by an appropriate option pricing model, is $1 per option. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. to 5. Prepare the appropriate journal entries to record compensation expense on December 31, 2021 and 2022. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2023, when the market price is $9 per share and the entry on December 31, 2027, when the remaining options that have vested expire without being exercised. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 to 5 Prepare the appropriate journal entries to record compensation expense on December 31, 2021 and 2022. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2023, when the market price is $9 per share and the entry on December 31, 2027, when the remaining options that have vested expire without being exercised. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.) Show less View transaction list Journal entry worksheet 2 3 4 Record compensation expense on December 31, 2021.

Note: i can only use cash, common stock, compensation expense, income tax payable, and 3 types of paid in capital (excess, expiration, stock option) for the journal entries.

Thank you.

Answer 1

Anaaoer total Compensaion e iii lun Opbion granted hivue option 2millon 1pa option Total compensation cot Options grasted x vaue f ophion 2milli on x pei ophon roillin Tola! compentation co million Jownal enucs to5 On dec 31,0a Cormpernatiro nperse 4millon 2 36 million dee 3, 2 Oa I On million Compensation expende 36 millan

On Man 12, 203 2million x8 pn Casha share X5 43 on Paid in capital-afoch options 54 milon dec 3, a0a On allion- 64 milion Patel En capital-ahock ophions 18 million General Jounal Delit CilGredit( decal,mpenation cxpense వ Paid Caphol-aock options 36 $36 Compensalin eupense dec 3 ఇం విని Paid in apital afoch opbions 436 36 arh 432 Man R 30a3aid in capilal -afock ophions Commen efock 54 54 Paid in Capital ee pa 4432 dec 31, Paid in Capital-zfock options 18 20toidin Capital-ezpfation f ochoplions 18