4 Or you may not see any. 5 World Street, Inc., offers a stock option plan...

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4 Or you may not see any. 5 World Street, Inc., offers a stock option plan to its regional managers. 6 7 8 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 9 expire December 31, 2032. The fair value of the options, estimated by an 10 appropriate option pricing model, is $5 per option. 11 Because the plan does not qualify as an incentive plan, World Street will 12 receive a tax deduction upon exercise of the options equal to the excess 13 of the market price at exercise over the exercise price. 14 The income tax rate is 24%. 15 16 17 18 If you cannot find an appropriate account in the drop down menu, please put vour account in the brown color cell. 1. Determine the total compensation cost pertaining to the stock option plan. Type in numbers only. $ million 2. Prepare the appropriate journal entries to record compensation expense and its 19 tax effect on December 31, 2026. 20 21 22 23 24 25 26 27 3. Prepare the appropriate journal entries to record 28 compensation expense and its tax effect on December 31, 2027. 29 30 31 32 33 34 35 36 37 38 4. Record the exercise of the options and their tax effect 39 if all of the options are exercised on March 20, 2031, 40 when the market price per share is $14 41 42 43 44 45 46 47 48 49 50 51 million million million million million million million million million million million million million million million million 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate 52 journal entries to record compensation expense and its tax effect on December 31, 2026. 53 Dr. 54 Cr. 55 Dr. 56 Cr. 57 million 58 million 59 million 60 million 61 62 6. Prepare the option plan qualifies as an incentive plan, record the exercise 63 of the options and their tax effect if all of the options are 64 exercised on March 20, 2031, when the market price per share is $123 65 Dr. Cash 920 4 Or you may not see any. 5 World Street, Inc., offers a stock option plan to its regional managers. 6 7 8 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 9 expire December 31, 2032. The fair value of the options, estimated by an 10 appropriate option pricing model, is $5 per option. 11 Because the plan does not qualify as an incentive plan, World Street will 12 receive a tax deduction upon exercise of the options equal to the excess 13 of the market price at exercise over the exercise price. 14 The income tax rate is 24%. 15 16 17 18 If you cannot find an appropriate account in the drop down menu, please put vour account in the brown color cell. 1. Determine the total compensation cost pertaining to the stock option plan. Type in numbers only. $ million 2. Prepare the appropriate journal entries to record compensation expense and its 19 tax effect on December 31, 2026. 20 21 22 23 24 25 26 27 3. Prepare the appropriate journal entries to record 28 compensation expense and its tax effect on December 31, 2027. 29 30 31 32 33 34 35 36 37 38 4. Record the exercise of the options and their tax effect 39 if all of the options are exercised on March 20, 2031, 40 when the market price per share is $14 41 42 43 44 45 46 47 48 49 50 51 million million million million million million million million million million million million million million million million 5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate 52 journal entries to record compensation expense and its tax effect on December 31, 2026. 53 Dr. 54 Cr. 55 Dr. 56 Cr. 57 million 58 million 59 million 60 million 61 62 6. Prepare the option plan qualifies as an incentive plan, record the exercise 63 of the options and their tax effect if all of the options are 64 exercised on March 20, 2031, when the market price per share is $123 65 Dr. Cash 920