ABC corporation provides numerous share-based compensation plans to its employees. Under the executive stock option plan, which qualifies as an incentive stock option plan, ABC granted options on Jan. 1, 2017, that permit executives to acquire 2,700,000 shares of the companys $2 par common stock within the next 5 years, but not before December 31, 2019 (this is the vesting date). The exercise price is the market value of the shares on the date of grant which is $16.75 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3.75 per option. No forfeitures are anticipated. Ignore the tax effects in your calculations.

Determine the total compensation cost for the above stock options.

How should the company handle the transaction on the date the options were awarded, Jan 1, 2017.

Present the appropriate journal entry to record the companys compensation expense on December 31, 2017.

How should the company handle the tax effects of this stock option plan?

ABC corporation also has a restricted stock unit plan for its other employees. On Jan 1, 2017 ABC awarded restricted stock units representing 800,000 shares of its $2 par common stock to its employees, subject to forfeiture if employment is terminated within four years. On the grant date, the shares have a market price of $16.75 per share. Ignore tax effects in your calculations.

Show two different approaches for handling the award of these shares on Jan 1, 2017.

Write the appropriate journal entry to record the companys compensation expense related to the restricted stock plan on Dec 31, 2017 under each of the two approaches given above ensure to clearly identify which journal entry is related to which approach.

Write the journal entry (if any) to record the lifting of restrictions on the restricted stock units at Dec 31, 2020 for each of the two approaches above clearly identify which actions is related to which approach. (If no journal entry is required provide a brief explanation of why).