Walters Audio Visual, Inc. offers a stock option plan to its regional managers. On January 1,...

Walters Audio Visual, Inc. offers a stock option plan to its regional managers. On January 1, 2018, 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, 2020, and expire December 31, 2024. 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 40%.

Required:
1. Determine the total compensation cost pertaining to the stock option plan.
2. to 4. Assume all of the options are exercised on March 20, 2023, when the market price is $12 per share. Prepare the necessary journal entries.
5. & 6. Assume the option plan qualifies as an incentive plan if all of the options are exercised on March 20, 2023, when the market price is $11 per share. Prepare the necessary journal entries.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Walters Audio Visual, Inc. offers a stock option plan to its regional managers. On January 1,...

Walters Audio Visual, Inc. offers a stock option plan to its regional managers. On January 1, 2018, 45 million options were granted for 45 million $1 par common shares. The exercise price is the market price on the grant date, $10 per share. Options cannot be exercised prior to January 1, 2020, and expire December 31, 2024. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan does not qualify...

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January...

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2018, options were granted for 24 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, 2020, and expire December 31, 2024. The fair value of the 24 million options, estimated by an appropriate option pricing model, is $1 per option. Required: 1. Determine the total compensation...

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January...

Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, 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, 2023, and expire December 31, 2027. 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...

Exercise 19-8 Stock options exercise; expirations [LO19-2] Walters Audio Visual Inc. offers an incentive stock option...

Exercise 19-8 Stock options exercise; expirations [LO19-2] Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2018, options were granted for 36 million $1 par common shares. The exercise price is the market price on the grant date—$10 per share. Options cannot be exercised prior to January 1, 2020, and expire December 31, 2024. The fair value of the 36 million options, estimated by an appropriate option pricing model, is $1 per...

Exercise 19-8 (Algo) Stock options exercise; expirations [LO19-2] Walters Audio Visual Inc. offers an incentive stock...

Exercise 19-8 (Algo) Stock options exercise; expirations [LO19-2] Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, options were granted for 64 million $1 par common shares. The exercise price is the market price on the grant date—$6 per share. Options cannot be exercised prior to January 1, 2023, and expire December 31, 2027. The fair value of the 64 million options, estimated by an appropriate option pricing model, is $1...

Citron Inc. offers an employee stock option plan (ESOP) to several of its senior executives. 20,000...

Citron Inc. offers an employee stock option plan (ESOP) to several of its senior executives. 20,000 options were granted on January 1, 20X5, under this plan. The exercise price of the options was $25 per share. They vested two years from the grant date. 100% of the options vested. Citron maintains a separate contributed surplus account for expired options. Other information about the ESOP follow: * The fair value of the ESOP using an appropriate option-pricing model was $300,000. *...

SE 20-1 Audio Visual Corporation Audio Visual Corporation (AVC) manufactures and sells visual display equipment. Headquartered...

SE 20-1 Audio Visual Corporation Audio Visual Corporation (AVC) manufactures and sells visual display equipment. Headquartered in Boston, it has seven sales offices with nearby warehouses that carry its inventory of new equipment and replacement parts. AVC has a departmentalized manufacturing plant with assembly, maintenance, engineering, scheduling, and cost accounting departments as well as several component parts departments. When management decided to upgrade its AIS, they installed a mainframe at headquarters and local area networks at each sales office. The...

Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were...

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018,...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No...

Subjects