On January 1, 2016, Cobbler Corporation awarded restricted stock units (RSUs) re
ID: 2582458 • Letter: O
Question
On January 1, 2016, Cobbler Corporation awarded restricted stock units (RSUs) representing 30 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. On the grant date, the shares had a market price of $3 per share.
Required:
1. Determine the total compensation cost pertaining to the RSUs. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
2. Prepare the appropriate journal entries. (If no entry is required for a transaction/event, 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 the award of RSUs on January 1, 2016.
2. Record compensation expense on December 31, 2016.
3. Record compensation expense on December 31, 2017.
4. Record compensation expense on December 31, 2018.
5. Record the lifting of restrictions on the RSUs and issuing shares at December 31, 2018.
Explanation / Answer
1 Determine the total compensation cost pertaining to the RSUs
30 million shares granted X $ $3 = $90 million fair value
2 Prepare the appropriate journal entries
1 Record the award of RSUs on January 1, 2016.
No Entry is made on the grant date
2-4 Record compensation expense on December 31, 2016,2017,2018
Compensation Expense ($90 miilion / 3years) $30 million
Paid-in Capital -- Restricted Stock $30 million
(note: entry will be same for the years 2016-2018)
5 Record the lifting of restrictions on the RSUs and issuing shares at December 31, 2018.
Paid-in Capital -- Restricted Stock $90
Common Stock ($30 million shares X $ 1 par) $30
Paid-in Capital - Excess of par (remainder) $60
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