Reference no: EM131258735
Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2013, 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, 2015, and expire December 31, 2019. The fair value of the 40 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. (Enter your answer in millions.)
2. Prepare the appropriate journal entries. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
1. Record compensation expense on December 31, 2013.
2. Record compensation expense on December 31, 2014.
3. Record the exercise of 75% of the options on March 12, 2015, when the market price is $9 per share.
4. Record expiration of options.
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