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Walters Audio Visual, Incorporated, offers a stock option plan to its regional managers. • On January 1, 2024, 48 million options were granted for 48 million $1 par common shares. • The exercise price is the market price on the grant date, $10 per share. Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030. • The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. • Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. . The income tax rate is 25%. Required: 1. Determine the total compensation cost pertaining to the stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share.

Walters Audio Visual, Incorporated, offers a stock option plan to its regional managers. • On January 1, 2024, 48 million options were granted for 48 million $1 par common shares. • The exercise price is the market price on the grant date, $10 per share. Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030. • The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. • Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. . The income tax rate is 25%. Required: 1. Determine the total compensation cost pertaining to the stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Complete this question by entering your answers in the tabs below. Req 1 2. & 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024 and 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. Note: (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).) View transaction list < Req 2 to 4 Journal entry worksheet 1 Req 1 Note: Enter debits before credits. Date December 31, 2024 < 2 Record entry Record compensation expense on December 31, 2024. Show Transcribed Text Req 5 and 6 View transaction list 1 3 Req 2 to 4 Req 5 and 6 2 Complete this question by entering your answers in the tabs below. Journal entry worksheet 4 Note: Enter debits before credits. Date December 31, 2024 Record entry 3 4 5 Clear entry 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share. Note: 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). 6 Record compensation expense on December 31, 2024. General Journal Clear entry 3 General Journal Debit Credit View general journal Ċ Debit Credit View general journal > > Show less Show less
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 2. & 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024 and 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. Note: (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).) View transaction list < Req 2 to 4 Journal entry worksheet 1 Req 1 Note: Enter debits before credits. Date December 31, 2024 < 2 Record entry Record compensation expense on December 31, 2024. Show Transcribed Text Req 5 and 6 View transaction list 1 3 Req 2 to 4 Req 5 and 6 2 Complete this question by entering your answers in the tabs below. Journal entry worksheet 4 Note: Enter debits before credits. Date December 31, 2024 Record entry 3 4 5 Clear entry 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share. Note: 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). 6 Record compensation expense on December 31, 2024. General Journal Clear entry 3 General Journal Debit Credit View general journal Ċ Debit Credit View general journal > > Show less Show less
Walters Audio Visual, Incorporated, offers a stock option plan to its regional managers. • On January 1, 2024, 48 million options were granted for 48 million $1 par common shares. • The exercise price is the market price on the grant date, $10 per share. • Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030. . • The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. • Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. • The income tax rate is 25%. Required: 1. Determine the total compensation cost pertaining to the stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 2. & 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024 and 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. Note: (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).) View transaction list 1 Req 5 and 6 Journal entry worksheet 2 3 4 5 6 > Show less
Transcribed Image Text:Walters Audio Visual, Incorporated, offers a stock option plan to its regional managers. • On January 1, 2024, 48 million options were granted for 48 million $1 par common shares. • The exercise price is the market price on the grant date, $10 per share. • Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030. . • The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. • Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. • The income tax rate is 25%. Required: 1. Determine the total compensation cost pertaining to the stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024. 6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $13 per share. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 2. & 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024 and 2025. 4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2029, when the market price is $14 per share. Note: (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).) View transaction list 1 Req 5 and 6 Journal entry worksheet 2 3 4 5 6 > Show less
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