Assume that on January 1, year 1, ABC Inc. issued 7,250 stock options with an estimated value of $13 per option. Each option entitles the owner to purchase one share of ABC stock for $25 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 7,250 stock options were exercised in year 3 when the ABC stock was valued at $34 per share. Identify ABCs year 1, 2, and 3 tax deductions and booktax differences (indicate whether permanent and/or temporary) associated with the stock options under the following alternative scenarios: Required:

1. The stock options are incentive stock options and ASC 718 applies to the options.
2. The stock options are nonqualified stock options and ASC 718 applies to the options.

Complete the following table. (For all requirements, leave no answer blank. Enter zero if applicable.)

Assume that on January 1, year 1, ABC Inc. issued 7,250 stock options with an estimated value of $13 per option. Each option entitles the owner to purchase one share of ABC stock for $25 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. Al 7,250 stock options were exercised in year 3 when the ABC stock was valued at $34 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 and ASC 718 applies to the options. b. The stock options are nonqualified stock options and ASC 718 applies to the options Complete the following table. (For all requirements, leave no answer blank. Enter zero if applicable.) Year 2 Year 1 Year 3 Temp/Perm Book-Tax Diff Book-Tax FavlUnfav Diff Fav/Unfav Fav/Unfav Temp/Perm Under ASC 718 0 N/A a. Incentive Stock Options 7 Unfavorable Permanent Unfavorable Permanent N/A b. Nonqualified Stock Options Unfavorable Temporary Unfavorable Temporary $ 29,000 Unfavorable Permanent Favorable Temporary