Assume that on January 1, year 1, ABC Inc. issued 6,050 stock options with an estimated value of $18 per option. Each option entitles the owner to purchase one share of ABC stock for $22 a share (the per share price of ABC stock on January 1, year 1, when the options were granted). The options vest at the end of the day on December 31, year 2. All 6,050 stock options were exercised in year 3 when the ABC stock was valued at $31 per share. Identify ABC's year 1, 2, and 3 tax deductions and book-tax differences (indicate whether permanent and/or temporary) associated with the stock options under the following alternative scenarios: Required: a. The stock options are incentive stock options. 5. The stock options are nonqualified stock options. Complete the following table. (For all requirements, leave no answer blank. Enter zero if applicable and select "N/A" if no effect.) Year 1 Book-Tax Diff Favorable/ Unfavorable Temporary Permanent Book-Tax Diff Year 2 Favorable! Unfavorable Temporary Permanent Year 3 Favorable/ Unfavorable Book-Tax Diff Temp/Perm Under ASC 718 Incentive Stock Options $ 54,450 Unfavorable Permanent $ 54,450 Unfavorable Permanent $ ONA N/A b. Nonqualified Stock Options $ 54,450 Unfavorable Temporary Unfavorable Temporary Favorable Temporary