Exercise 19-8 (Static) Stock options exercise; expirations [LO19-2]Martinez Audio Visual Incorporated offers an incentive stock option plan to its regional managers. On January 1, 2024, options weregranted 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, 2026, and expire December 31, 2030.• 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. to 5. Prepare the appropriate journal entries to record compensation expense on December 31, 2024 and 2025. Prepare theappropriate journal entry to record the exercise of 75% of the options on March 12, 2026, when the market price is $9 per share andthe entry on December 31, 2030, when the remaining options that have vested expire without being exercised.

Journal entry is the procedure for initially documenting commercial transactions in the books of…

Answered: Martinez Audio Visual Incorporated…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $1.95. Compare the percentage gains and losses from a $97,500 investment in the stock versus the option in 90 days for stock prices of $40, $50, and $60. (Leave no cells blank - be certain to enter "0" and select "None" wherever required. Input all amounts as positive values. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Options % gain/loss Stock % gain/loss $40 $50 $60
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Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2021, 40 million 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 options, estimated by an appropriate option pricing model, is $2 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%. 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 is $12 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, 2021.6. Assuming the option…
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Martinez Audio Visual Incorporated offers an incentive stock option plan to its regional managers. On January 1, 2024, 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, 2026, and expire December 31, 2030. . 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. to 5. Prepare the appropriate journal entries to record compensation expense on December 31, 2024 and 2025. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2026, when the market price is $9 per share and the entry on December 31, 2030, 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…
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