On January 1, 2016, VKI Corporation awarded restricted stock units (RSUs) repres
ID: 2594805 • Letter: O
Question
On January 1, 2016, VKI Corporation awarded restricted stock units (RSUs) representing 30 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminatedwithin three years. After the recipients of the RSUs satisfy the vesting requirement, the companywill 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.
2. Prepare the appropriate journal entry to record the award of RSUs on January 1, 2016.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2016.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2017.
5. Prepare the appropriate journal entry to record compensation expense on December 31, 2018.
6. Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs andissuing shares at December 31, 2018
Explanation / Answer
Answer:
Required:1.
Determine the total compensation cost pertaining to the RSUs.
total compensation cost pertaining to the RSUs.
=30 million x $3 per share.
=90 million fair value
______________________________________
2.
Prepare the appropriate journal entry to record the award of RSUs on January 1, 2016.
No entry will be made on grant date
____________________________________
3.
Prepare the appropriate journal entry to record compensation expense on December 31, 2016.
Description
Debit $
amount in
million
Credit $
amount in
million
Compensation expanses
(90 million/ 3 years)
30
To paid in capital-restricted stock
30
______________________________________
4.
Prepare the appropriate journal entry to record compensation expense on December 31, 2017.
Description
Debit $
amount in
million
Credit $
amount in
million
Compensation expanses
(90 million/ 3 years)
30
To paid in capital-restricted stock
30
________________________________________________________
5.
Prepare the appropriate journal entry to record compensation expense on December 31, 2018.
Description
Debit $
amount in
million
Credit $
amount in
million
Compensation expanses
(90 million/ 3 years)
30
To paid in capital-restricted stock
30
______________________________________________________
6.
Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, 2018
Description
Debit $
amount in
million
Credit $
amount in
million
Paid in capital-restricted stock
90
Common stock
(30 million x $1 per share)
30
Paid in capital excess of par
60
Description
Debit $
amount in
million
Credit $
amount in
million
Compensation expanses
(90 million/ 3 years)
30
To paid in capital-restricted stock
30
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