$\mathrm{}\mathrm{}\mathrm{}$$$$$$\mathrm{}\mathrm{}\mathrm{}$ 

 

Martinez Audio Visual Incorporated offers an incentive stock option plan to its regional managers. On January $1,2024,$ options were

granted for $8$ million $$1$ par common shares.

The exercise price is the market price on the grant date$-$ $$6$ per share.

Options cannot be exercised prior to January $1,2026,$ and expire December $31,2030.$

The fair value of the $8$ million options, estimated by an appropriate option pricing model, is $$1$ per option.

Required:

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

to $5.$ Prepare the appropriate journal entries to record compensation expense on December $31,2024$ and $2025.$ Prepare the

appropriate journal entry to record the exercise of $75\%$ of the options on March $12,2026,$ when the market price is $$7$ per share and

the entry on December $31,2030,$ when the remaining options that have vested expire without being exercised.