Question

On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 5 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 $9.00 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, 2021.

3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.

4. Prepare the appropriate journal entry to record compensation expense on December 31, 2022.

5. Prepare the appropriate journal entry to record compensation expense on December 31, 2023.

6. Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, 2023

Answer 1

Answer and Explanation:

1.

5 million shares granted ×$9.00=$45,000,000

2. No entry is made on the grant day.

3-5 )Dr compensation expenses 15

(45 million ÷3 years)

Cr Paid in capital-restricted stock 15

Note: The entry is the same for years 2021 to 2023

6. Dr Paid in capital-restricted stock 45

Cr Common stock($5 million share×$1 par)

$5

Cr Paid in capital - excess of par (Remainder) $40