Question

1. On January 1, 2018, ABC Company awarded 15M of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated by the end 2020. On the date of the grant, the stock had a market price of $3 per share.

1. What is the total Compensation Expense pertaining to the restricted shares.

2. What is the journal entry on the date of the grant, January 1, 2018?

3. What is the journal entry to record the compensation expense on Dec 31, 2018?

4. What is the journal entry to record the compensation expense on Dec 31, 2019?

5. What is the journal entry to record the compensation expense on Dec 31, 2020?

6. What is the journal entry on the lifting of restrictions on December 31, 2020?

Answer 1

Solution:

Total compensation cost = $15,000,000*$3 =$45,000,000

Journal entries:

Date	Account title and explanation	Debit	Credit
01/01/2018	No entry
31/12/2018	Compensation expenses ($45,000,000/3)	$15,000,000
	Paid in capital Restricted stock		$15,000,000
	(To record the compenstaion expenses)
31/12/2019	Compensation expenses ($45,000,000/3)	$15,000,000
	Paid in capital Restricted stock		$15,000,000
	(To record the compenstaion expenses)
31/12/2020	Compensation expenses ($45,000,000/3)	$15,000,000
	Paid in capital Restricted stock		$15,000,000
	(To record the compenstaion expenses)
31/12/2020	Paid in capital restircted stock	$45,000,000
	Common stock ($15,000,000*$1)		$15,000,000
	Paid in capital excess of par		$30,000,000
	(To record the lifting of restrictions and issue of shares)

Please give a Thumbs up ?. Thanks!!