Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2018. The options permit holders to acquire 9 million of the company's $1 par common shares for $36 within the next six years, but not before January 1, 2021 (the vesting date). The market price of the shares on the date of grant is $40 per share. The fair value of the 9 million options, estimated by an appropriate option pricing model is $6 per option. Because the plan does not qualify as an incentive plan, JBL 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 tax rate is 40% Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. & 3. Record the necessary journal entries on December 31, 2018, 2019 and 2020. Assume all of the options are exercised on August 21, 2022, when the market price is $41 per share. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 and 3 Determine the total compensation cost pertaining to the incentive stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) Total compensation cost million (Reg Req 2 and 3 > Req 1 Req 2 and 3 Record the necessary journal entries on December 31, 2018, 2019, and 2020. Assume all of the options are exercised on August 21, 2022, when the market price is $41 per share. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Show less View transaction list Journal entry worksheet

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Performance Auditing Of Public Sector Property Contracts

Authors: Lori Keating

1st Edition

0566089998, 978-0566089992

More Books

Students also viewed these Accounting questions