Question

On January 1, 2016, VKI Corporation awarded restricted stock units (RSUs) representing 11 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 $7.20 per share.

Required:

1. Determine the total compensation cost pertaining to the RSUs. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

2. to 6. Prepare the appropriate journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

Answer:

1.$79,200,000

2.No entry is made on the grant date

3 - 5

Dr Compensation expense 264

Cr Paid-in capital—restricted stock 264

6.

Dr Paid-in capital—restricted stock 792

Cr Common stock 11

Cr Paid-in capital—excess of par (remainder) 781

Explanation:

1.Total compensation cost pertaining to the RSUs

Restricted stock units * Market price

11,000,000 *7.20

=$79,200,000

2.

January 1, 2016

No entry is made on the grant date

3 - 5

December 31, 2016, 2017 and 2018. (Note: The entry is the same for years 2016 - 2018.)

Dr Compensation expense 264

($792 million ÷ 3 years)

Cr Paid-in capital—restricted stock 264

6.

Dr Paid-in capital—restricted stock 792

Cr Common stock 11

(11 million shares x $1 par)

Cr Paid-in capital—excess of par (remainder) 781