Exercise $19-8($Algo$)$ Stock options exercise; expirations $[$LO$19-2]$

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January $1,2021,$ options were granted for $56$ million $$1$ par common shares. The exercise price is the market price on the grant date$$$$9$ per share. Options cannot be exercised prior to January $1,2023,$ and expire December $31,2027.$ The fair value of the $56$ million options, estimated by an appropriate option pricing model, is $$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 $$10$ per share and the entry on December $31,2027,$ when the remaining options that have vested expire without being exercised.