Quiz4_NH
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San Diego Mesa College *
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Finance
Date
Jan 9, 2024
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xlsx
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3
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Student's Last Name: Halimi
First name:
Najeebullah
Red ID:
824968242
WorldStreet, Inc., offers a stock option plan to its regional managers. On January 1, 2021,20 million options were granted for 20 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 options, estimated by an
appropriate option pricing model, is $2 per option.
Because the plan does not qualify as an incentive plan, WorldStreet 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%.
Numbers only
$40,000,000 million
Compensation expense
20,000,000 million
Paid-in capital-stock options
20,000,000 million
Deferred tax asset
5000000 million
Tax expense
5000000 million
Compensation expense
20000000 million
Paid-in capital-stock options
20000000 million
Deferred tax liabilities
5000000 million
Tax expense
5000000 million
4. Record the exercise of the options and their tax effect
if all of the options are exercised on March 20, 2026,
when the market price per share is $12
Cash
160000000 million
Paid-in capital-stock options
40000000 million
Common stock at par
20000000 million
Paid-in capital-excess of par
180000000 million
Please put your last name, first name, and Red ID, first of all.
Or you may not see any. 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, 2021.
3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2022.
Compensation expense
20000000 million
Paid-in capital-stock options
20000000 million
6. Prepare 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, 2026, when the market price per share is $11
Cash
160000000 million
Paid-in capital-stock options
40000000 million
Common stock at par
20000000 million
Paid-in capital-excess of par
180000000 million
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, 2021.
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40 million $1 par common shares. The exercise price is the market price on the grant date-$8 per share. Options cannot be exercised
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Complete this question by entering your answers in the tabs below.
Req 1
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Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, options were granted for 40 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 40 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. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.3. Prepare the appropriate journal entry to record compensation expense on December 31, 2022.4. 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.5. Prepare the appropriate journal entry on December 31, 2027, when the remaining options that have vested expire without being exercised.
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Exercise price for options
1$40
Market price at grant date (January 1, 2020)
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a. Prepare the journal entry(ies) for the first year of the stock-option plan.
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Walters Audio Visual Inc. offers and incentive stock option plan to its regional managers. On January 1, 2021, options were granted for 28 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 28 million options, estimated by an appropriate option pricing model, is $1 per option.
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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.
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●
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●
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●
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• The fair value of the 72 million options, estimated by an appropriate option pricing model, is $1 per option.
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Multiple Choice
O
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$90.0 million
$0
$20.0 million
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Assume that TPL has a stock-option plan for top management. Each stock option represents the right to purchase a share of TPL $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. TPL has 75,0 00 stock options outstanding, which were granted at the beginning of 2020. The following data relate to the option grant: Exercise price for options $31; Market price at grant date (January 1, 2020) $31; Fair value of options at grant date (January 1, 2020) $2; Service period 4 years.
Prepare the journal entry (ies) for the first year of the plan.
Prepare the journal entry (ies) for the first year of the plan assuming that, rather than options, 2,500 shares of restricted stock were granted at the beginning of 2020.
Now assume that the market price of TPL stock on the grant was $35 per share. Repeat the requirements for (a) and (b).
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