Question

On January 1, 2014, Barwood Corporation granted 2,000 shares of restricted $5 par value common stock to executives. The market price (fair value) of the stock is $65 per share on the date of grant. The period of benefit is 2 years.

Prepare Barwood’s journal entries for January 1, 2014, and December 31, 2014 and 2015.

Answer 1

The journal entries are as follows:

(i) On January 1, 2014

Unearned compensation A/c(2,000 × $65) Dr. $130,000

To paid in capital in excess of par ($130,000 - $10,000) $120,000

To common stock (2,000 × $5) $10,000

(To record the unearned compensation)

(ii) On December 31, 2014

Compensation expense A/c Dr. $65,000

To unearned compensation $65,000

(To record the compensation expense)

Workings:

Compensation expense = $130,000 ÷ 2

= $65,000

(iii) On December 31, 2015

Compensation expense A/c Dr. $65,000

To unearned compensation $65,000

(To record the compensation expense)