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JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2024. The options permit holders to acquire 8 million of the company's $1 par common shares for $15 within the next six years, but not before January 1, 2027 (the vesting date). The market price of the shares on the date of grant is $19 per share. The fair value of the 8 million options, estimated by an appropriate option pricing model, is $6 per option. . Because the plan does not qualify as an incentive plan, JBL 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 tax rate is 25% . Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024, 2025, and 2026. 3. Record the exercise of the options and their tax effect if all of the options are exercised on August 21, 2028, when the market price is $20 per share.

JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2024. The options permit holders to acquire 8 million of the company's $1 par common shares for $15 within the next six years, but not before January 1, 2027 (the vesting date). The market price of the shares on the date of grant is $19 per share. The fair value of the 8 million options, estimated by an appropriate option pricing model, is $6 per option. . Because the plan does not qualify as an incentive plan, JBL 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 tax rate is 25% . Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024, 2025, and 2026. 3. Record the exercise of the options and their tax effect if all of the options are exercised on August 21, 2028, when the market price is $20 per share.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans, Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2024. The options permit holders to acquire 8 million of the company's $1 par common shares for $15 within the next six years, but not before January 1, 2027 (the vesting date). .The market price of the shares on the date of grant is $19 per share. The fair value of the 8 million options, estimated by an appropriate option pricing model, is $6 per option. • Because the plan does not qualify as an incentive plan, JBL 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 tax rate is 25% Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024, 2025, and 2026 3. Record the exercise of the options and their tax effect if all of the options are exercised on August 2 2028, when the market price is $20 per share. Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 2. & 3. Record the necessary journal entries on December 31, 2024, 2025, and 2026. Assume all of the options are exercised on August 21, 2028, when the market price is $20 per share. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round intermediate calculations and final answers to 1 decimal place. Enter your answers in milions (.e., 5,500,000 should be entered as 5.5). Show less A
Transcribed Image Text:JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans, Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2024. The options permit holders to acquire 8 million of the company's $1 par common shares for $15 within the next six years, but not before January 1, 2027 (the vesting date). .The market price of the shares on the date of grant is $19 per share. The fair value of the 8 million options, estimated by an appropriate option pricing model, is $6 per option. • Because the plan does not qualify as an incentive plan, JBL 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 tax rate is 25% Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2024, 2025, and 2026 3. Record the exercise of the options and their tax effect if all of the options are exercised on August 2 2028, when the market price is $20 per share. Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 2. & 3. Record the necessary journal entries on December 31, 2024, 2025, and 2026. Assume all of the options are exercised on August 21, 2028, when the market price is $20 per share. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round intermediate calculations and final answers to 1 decimal place. Enter your answers in milions (.e., 5,500,000 should be entered as 5.5). Show less A
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