Answer:
A. 2019
Dr Compensation expense $30 million
Cr Paid-in capital—restricted stock $30 million
2020
Dr Compensation expense $30 million
Cr Paid in capital-restricted stock $30 million
B. $12 million
Explanation:
a. Calculation to determine What journal entry will PHN Foods prepare to record executive compensation regarding these shares at December 31, 2019 and December 31, 2020
First step is to calculate the fair value of award using this formula
Fair value of award=Fair value per option×Options granted
Let plug in the formula
Fair value of award=$5*18 million
Fair value of award=$90 million
Based on the above calculation the amount of $90 million total compensation will be expensed equally over the vesting period of 3 years thereby reducing Earnings by the amount of $30 million calculated as ($90 million/3 years) each year
Now let Prepare the journal entry
2019
Dr Compensation expense $30 million
Cr Paid-in capital—restricted stock $30 million
($90 million/3 years)
2020
Dr Compensation expense $30 million
Cr Paid in capital-restricted stock $30 million
($90 million/3 years)
b. Calculation to determine what will be the net increase in the denominator of the EPS fraction
Using this formula
EPS fraction net increase= 2020 shares - Restricted shares
Let plug in the formula
EPS fraction net increase= $30 million - $18 million
EPS fraction net increase= $12 million
Theretore what will be the net increase in the denominator of the EPS fraction iis $12 million
