Record the necessary journal entries on December 31, 2016, 2017, and 2018. Assum
ID: 2565271 • Letter: R
Question
Record the necessary journal entries on December 31, 2016, 2017, and 2018. Assume all of the options are exercised on August 21, 2020, when the market price is $39 per share. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Record compensation expense on December 31, 2016.
Record any tax effect related to compensation expense recorded in 2016.
Record compensation expense on December 31, 2017.
Record any tax effect related to compensation expense recorded in 2017.
Record compensation expense on December 31, 2018.
Record any tax effect related to compensation expense recorded in 2018.
Record the exercise of the options on August 21, 2020 when the market price is $39 per share.
Record any tax effect related to the exercise of the options.
2. & 3.Record the necessary journal entries on December 31, 2016, 2017, and 2018. Assume all of the options are exercised on August 21, 2020, when the market price is $39 per share. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Record compensation expense on December 31, 2016.
Record any tax effect related to compensation expense recorded in 2016.
Record compensation expense on December 31, 2017.
Record any tax effect related to compensation expense recorded in 2017.
Record compensation expense on December 31, 2018.
Record any tax effect related to compensation expense recorded in 2018.
Record the exercise of the options on August 21, 2020 when the market price is $39 per share.
Record any tax effect related to the exercise of the options.
JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2016. The options permit holders to acquire 5.5 million of the company's $1 par common shares for $34 within the next six years, but not before January 1, 2019 (the vesting date). The estimated by an appropriate option pricing model, is S6 per option. Because the plan does not qualify as an incentive plan, JBL will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The tax rate is 40%. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) The total compensation cost millionExplanation / Answer
1. Compensation cost to be recognized over the three year period(Jan 2016-Jan 2019) =5.5 million options*$ 6= 33 millions Total compensation cost = $ 33 millions Debit Credit 31-Dec-16 Compensation cost 11000000 Additional paid-in-capital 11000000 (33000000/3) Deferred tax asset 4400000 Tax expense 4400000 (11000000*40%) 31-Dec-17 Compensation cost 11000000 Additional paid-in-capital 11000000 (33000000/3) Deferred tax asset 4400000 Tax expense 4400000 (11000000*40%) 31-Dec-18 Compensation cost 11000000 Additional paid-in-capital 11000000 (33000000/3) Deferred tax asset 4400000 Tax expense 4400000 (11000000*40%) 21-Aug-20 Cash (5.5 mlns.*34) 187000000 Additional paid-in-capital(11000000*3 entries above) 33000000 Common stock( 5.5 mlns* $1) 5500000 Paid-in-capital in excess of par,Common stock (Plug-in fig.) 214500000 Tax expense 13200000 Deferred tax asset 13200000 Tax expense(39-34)*5500000*40% 11000000 Taxes payable 11000000 (On exercise of the options)
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