Question

On January 1, 2016, VKI Corporation awarded restricted stock units (RSUs) representing 9 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 $7.80 per share.

Required: 1.) Determind the total compensation cost pertaining to the RSU's 2.) Prepare the appropriate journal entries Record the award of RSU's on January 1, 2016. Record the Compensation expense on December 31, 2016. Record the Compensation expense on December 31, 2017. Record the Compensation expense on December 31, 2018. Record the lifting of restrictions on the RSU's and issuing shares at December 31, 2018.

Answer 1

SOLUTION

1. Total compensation = Shares granted * Market price

= 9 million * $7.80 = 70.2 million

2. Journal Entries-

S.No.	Account titls and Explanations	Debit ($ in millions)	Credit ($in millions)
1.	No entry is made on the grant date
2.	Compensation expense	23.4
	Paid-in capital-restricted stock		23.4
	($70.2 million / 3 years)
	(To record the Compensation expense on December 31, 2016)
3.	Compensation expense	23.4
	Paid-in capital-restricted stock		23.4
	($70.2 million / 3 years)
	(To record the Compensation expense on December 31, 2017)
4.	Compensation expense	24.3
	Paid-in capital-restricted stock		24.3
	($70.2 million / 3 years)
	(To record the Compensation expense on December 31, 2018)
5.	Paid-in capital-restricted stock	70.2
	Common stock (9 million shares * $1 par)		9
	Paid-in capital- excess of par		61.2
	(To record the lifting of restrictions on the RSU's and issuing shares at December 31, 2018)