Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, 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, 2023, and expire December 31, 2027. The fair value of the 8 million options, estimated by an appropriate option pricing model, is $1 per option. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. to 5. Prepare the appropriate journal entries to record compensation expense on December 31, 2021 and 2022. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2023, when the market price is $7 per share and the entry on December 31, 2027, when the remaining options that have vested expire without being exercised. Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 to 5 Prepare the appropriate journal entries to record compensation expense on December 31, 2021 and 2022. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2023, when the market price is $7 per share and the entry on December 31, 2027, when the remaining options that have vested expire without being exercised. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Show less No Date General Journal Debit Credit 1 4 December 31, 202 Compensation expense Paid-in capital - stock options 4 2 42 X December 31, 202 Cash Paid-in capital - stock options xls x x 6. Journal entry worksheet Record compensation expense on December 31, 2021. Note: Enter debits before credits. Debit Credit Date General Journal December 31, 2021 Compensation expense Paid-in capital - stock options 4 Record entry Clear entry View general journal Show less View transaction list Journal entry worksheet Record compensation expense on December 31, 2022. Note: Enter debits before credits. Credit Date General Journal December 31, 2022 Cash Paid-in capital - stock options Common stock Paid-in capital - excess of par Debit 42 6 6 42 Record entry Clear entry View general journal Record the exercise of 75% of the options on March 12, 2023, when the market price is $7 per share. Note: Enter debits before credits. Date Debit Credit March 12, 2023 General Journal Paid-in capital - stock options Paid-in capital - expiration of stock options 2 Record entry Clear entry View general journal Record expiration of options. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2027 Record entry Clear entry View general journal
