5 Walters Audio Visual, 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, $10 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%. 10 points 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, 2021. 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2022. 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 $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, 2021. 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, 2026, 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 Req 5 and 6 Determine the total compensation cost pertaining to the stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) Total compensation cost million :X This is a numeric cell, so please enter numbers only. Req 2 to 4 > Reg 1 Reg 2 to 4 Reg 5 and 6 2. & 3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2021 and 2022. 4. Assume all of the options are exercised on March 20, 2026, when the market price is $14 per share. Prepare the necessary journal entries. (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).) Show less View transaction list Journal entry worksheet Record compensation expense on December 31, 2021. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021 1 Record compensation expense on December 31, 2021. 2 Record any tax effect related to compensation expense recorded in 2021. 3 Record compensation expense on December 31, 2022. 4 Record any tax effect related to compensation expense recorded in 2022. Credit 5 Record the exercise of the options on March 20, 2026 when the market price is $14 per share. 6 Record any tax effect related to the exercise of the options. Req 1 Req 2 to 4 Req 5 and 6 Assume the option plan qualifies as an incentive plan if all of the options are exercised on March 20, 2026, when the market per share. Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No journal entry re first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet Record compensation expense on December 31, 2021. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021 x 1 Record compensation expense on December 31, 2021. 2 Record any tax effect related to compensation expense recorded in 2021. 3 Record the exercise of the options on March 20, 2026 when the market price is $13 per share. 4 it Record any tax effect related to the exercise of the options