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 $1,2024.$

The options permit holders to acquire $7$ million of the company's $$1$ par common shares for $$26$ within the next six years, but not before January $1,2027($the vesting date$).$

The market price of the shares on the date of grant is $$30$ per share.

The fair value of the $7$ 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 $25\%.$

Required:

Determine the total compensation cost pertaining to the incentive stock option plan.

Prepare the appropriate journal entries to record compensation expense and its tax effect on December $31,2024,2025,$ and $2026.$

Record the exercise of the options and their tax effect if all of the options are exercised on August $21,2028,$ when the market price is $$31$ per share.

Complete this question by entering your answers in the tabs below.

Req $1$

Determine the total compensation cost pertaining to the incentive stock option plan.

Note: Enter your answer in millions $($I$.$e$.,10,000,000$ should be entered as $10).$