Walters Audio Visual, Incorporated, offers a stock option plan to its regional managers.

On January $1,2024,32$ million options were granted for $32$ million $$1$ par common shares.

The exercise price is the market price on the grant date, $$8$ per share.

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

The fair value of the options, estimated by an appropriate option pricing model, is $$2$ per option.

Because the plan does not qualify as an incentive plan, Walters 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 income tax rate is $25\%.$

Required:

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

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

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

Record the exerclse of the options and their tax effect if all of the options are exercised on March $20,2029,$ when the market price is $$12$ per share.

Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December $31,2024.$

Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March $20,2029,$ when the market price is $$11$ per share.

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

Req $2$ to $4$

Req $5$ and $6$

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

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