Question

What is the journal entry to record the grant of 1,000 shares of restricted stock to employees on the grant date?

(A) Debit Common Stock $40,000, credit Paid-In Capital - Restricted Stock $40,000
(B) Debit Share-Based Compensation Expense $40,000, credit Common Stock $40,000
(C) Debit Paid-In Capital - Restricted Stock $40,000, credit Share-Based Compensation Expense $40,000
(D) Debit Common Stock $40,000, credit Share-Based Compensation Expense $40,000

Answer 1

The correct journal entry to record the grant of 1,000 shares of restricted stock to employees is (B) Debit Share-Based Compensation Expense $40,000, credit Common Stock $40,000

Step-by-step explanation:

When recording the grant of 1,000 shares of restricted stock to employees on the grant date, the proper journal entry would be to debit Share-Based Compensation Expense and credit Paid-In Capital - Restricted Stock. This entry reflects the cost of employee services received in exchange for the stock award and records the expense over the period the employees earn the stock, often referred to as the vesting period. No common stock is credited at the grant date because the stock is not yet owned by the employees and typically there are conditions that must be met before the stock is fully vested.

The correct journal entry is:

(B) Debit Share-Based Compensation Expense $40,000, credit Common Stock $40,000