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Chap019 - Student Name Instructor Class McGraw-Hill/Irwin...

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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 19-06 Requirement 1: WALTERS AUDIO VISUAL, INC. Total Compensation Cost ($ in millions, except "per option" amounts) At January 1, 2011, the estimated value of the award is: Estimated fair value per option $2 Options granted 40 Total compensation $80 Correct! WALTERS AUDIO VISUAL, INC. General Journal ($ in millions) Account Debit Credit Requirement 2: Compensation expense 40 Paid-in capital - stock options 40 «- Correct! Deferred tax asset 16 Tax expense 16 «- Correct! Requirement 3: Compensation expense 40 Paid-in capital - stock options 40 «- Correct! Deferred tax asset 16 Tax expense 16 «- Correct! Requirement 4: Cash 320 Paid-in capital - stock options 80 Common stock (40 million shares at $1 par per share) 40 Paid-in capital - excess of par 360 «- Correct! Income taxes payable 64 Deferred tax asset 32 Paid-in capital - tax effect of stock options 32 «- Correct! Requirement 5: Compensation expense 40 Paid-in capital - stock options 40 «- Correct! No deferred tax asset is recorded because an incentive plan does not provide the employer a tax deduction.
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