4 8 WorldStreet, Inc., offers a stock option plan to its regional managers. 5 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, 7 $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 9 appropriate option pricing model, is $2 per option. 10 Because the plan does not qualify as an incentive plan, WorldStreet will 11 receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. 13 The income tax rate is 25%. 14 1. Determine the total compensation cost pertaining to the 15 Numbers only 12 2. Prepare the appropriate journal entries to record compensati 16 17 18 19 20 21 FE Sheet1 Calibri 11 BI U A 21 f* A B DE F 3. Prepare the appropriate journal entries to record 22 compensation expense and its tax effect on December 31, 2022. 23 24 25 26 27 28 29 4. Record the exercise of the options and their tax effect 30 if all of the options are exercised on March 20, 2026, 31 when the market price per share is $14 32 33 34 35 36 37 38 39 40 41 42 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation ovnence and its tav effect on December 21 21 Sheet1 f* A B DE F G H 42 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, 2 43 44 45 46 47 48 6. Prepare the option plan qualifies as an incentive plan, record the exercise 49 of the options and their tax effect if all of the options are 50 exercised on March 20, 2026, when the market price per share is $13 51 52 53 54 55 56 57 58 59 60 61 62 63 Sheet1