Question

On January 1, 2018, Patriots Co. 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:

Determine the total compensation cost pertaining to the RSUs.

Prepare the appropriate journal entry to record the award of RSUs on January 1, 2018.

Prepare the appropriate journal entry to record compensation expense on December 31, 2018, December 31, 2019, and December 31, 2020.

Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, 2020.

Answer 1

1	Determine the total compensation cost pertaining to the RSUs
	Fair value per share	$3
	Shares awarded	30 million
	Total compensation cost pertaining to RSUs	$90 million	(30 million x $3)
2	Prepare the appropriate journal entry to record the award of RSUs on January 1, 2018
	No entry required
3	Prepare the appropriate journal entry to record compensation expense.
	December 31, 2018
	Compensation Expense ($90 million/3 years)	$30,000,000
	Paid in capital-restricted stock		$30,000,000
	December 31, 2019
	Compensation Expense ($90 million/3 years)	$30,000,000
	Paid in capital-restricted stock		$30,000,000
	December 31, 2020
	Compensation Expense ($90 million/3 years)	$30,000,000
	Paid in capital-restricted stock		$30,000,000
4	Prepare the appropriate journal entry to record the lifting of restriction on the RSUs and
	issuing shares at December 31, 2020
	Paid in capital-restricted stock	$90,000,000
	Common Stock		$30,000,000
	APIC-Common Stock		$60,000,000