WorldStreet, Inc., offers a stock option plan to its regional managers.

On January $1,2026,40$ million options were granted for $40$ 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 $1,2028,$ and

expire December $31,2032.$ The fair value of the options, estimated by an

appropriate option pricing model, is $$5$ per option.

Because the plan does not qualify as an incentive plan, WorldStreet 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 $24\%.$

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account in the brown color cell.

$1.$ Determine the total compensation cost pertaining to the stock option plan.

$2.$ Prepare the appropriate journal entries to record comepnstion expense and its tax effect on December $31,2026.$

$3.$ Prepare the appropriate journal entries to record compensation expense and its tax effect on December $31,2027.$

$4.$ Record the exercise of the options and their tax effect if all of the options are excersied on March $20,2031,$ when the market price per share is $$14.$

$5.$ Assume the option plan qualifies as an incentive plan. Prepare the appropraite journal entries to record compensation expense and its tax effect on December $31,2026.$

$6.$ Prepare 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 $20,2031,$ when the market price per share is $$123.$