Business

Question

On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 22 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 $4.20 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.

1 Answer

  • Answer:

    1.$92.4million

    2. January 1, 2021

    No journal entry

    3. December 31, 2021

    December 31, 2022

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    4. December 31, 2022

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    5. December 31, 2023

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    6. December 31, 2023

    Dr Paid in capital -restricted stock $92.4million

    Cr Common stock $22 million

    Cr Paid in capital-excess of par $70.4 million

    Explanation:

    1. Calculation to determine the total compensation cost pertaining to the RSUs

    Total compensation cost =$4.20 fair value per share × 22 million shares represented by RSUs granted

    Total compensation cost=$92.4million

    Therefore the total compensation cost pertaining to the RSUs is $92.4million

    2. Preparation of the appropriate journal entry to record the award of RSUs on January 1, 2021

    January 1, 2021

    No journal entry

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

    December 31, 2021

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    ($92.4million/3 years)

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

    December 31, 2022

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    ($92.4million/3 years)

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

    December 31, 2023

    Dr Compensation expense $30.8million

    Cr Paid in capital -restricted stock $30.8million

    ($92.4million/3 years)

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

    December 31, 2023

    Dr Paid in capital -restricted stock $92.4million

    Cr Common stock $22 million

    Cr Paid in capital-excess of par $70.4 million

    ($92.4million-$22 million)

NEWS TODAY

You May Be Interested