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

On January $1,2024,48$ million options were granted for $48$ million $$1$ par common shares.

The exercise price is the market price on the grant date, $$7$ 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 exercise of the options and their tax effect if all of the options are exercised on March $20,2029,$ when the marke price is $$11$ 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 $$10$ per share.

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