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I need a detailed explanation, step by step. Thanks. Several years ago, the Johnson Co....

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Accounting

I need a detailed explanation, step by step. Thanks.

Several years ago, the Johnson Co. granted options on 5,000 shares of its common stock. The fair market value of each option on the grant date was $3 per share. The exercise price is $2. The tax rate (all years) is 20%. The options are exercised at the end of the current year. At the beginning of the current year "Paid-in capital tax effect of stock options" had a credit balance of $10,000

1. What is the ending balance of Paid-in capital tax effect of stock options if the fair market value of the stock on the exercise date was $3 per share?

2. What is the balance of Paid-in capital tax effect of stock options at the end of the current year if the fair market value of Johnson's stock on the exercise date was $11 per share?

3. What is the ending Paid-in capital tax effect of stock options, if the market price of the stock on the exercise date is $5.

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