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 is not complete.
Complete this question by entering your answers in the tabs below.
Reg 1 Reg 2 to 6
Determine the total compensation cost pertaining to the RSUS. (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Total compensation cost $ 45.0 million

Answer 1

1.$45 million

2. No journal entry required

3. Dr Compensation expense $15 million

Cr paid in capital - restricted stock $15 million

4. Dr Compensation expense $15 million

Cr Paid in capital - restricted stock $15 million

5. Dr Compensation expense $15 million

Cr Paid in capital - restricted stock $15 million

6. Dr Paid in capital - restricted stock $45 million

Cr Common stock $5 million

Cr Paid in capital - excess of par $40 million

Step-by-step explanation:

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

Total compensation cost pertaining to the RSUs

=$9.00 fair value per share × 5 million shares represented by RSUs granted

Total compensation cost pertaining to the RSUs=$45 million

Therefore the total compensation cost pertaining to the RSUs will be $45 million

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

No Journal entry required

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

Dr Compensation expense $15 million

($45 million/3 years )

Cr Paid in capital - restricted stock $15 million

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

Dr Compensation expense $15 million

Cr Paid in capital - restricted stock $15 million

($45 million/3 years )

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

Dr Compensation expense $15 million

Cr Paid in capital - restricted stock $15 million

($45 million/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.

Dr Paid in capital - restricted stock $45 million

Cr Common stock $5 million

Cr Paid in capital - excess of par $40 million

($45 million-$5 million)