Question

Holt Company issues 10,000 shares of restricted stock to its new CEO, on January 1, 2020. The stock has a fair value of $260,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if the CEO stays with the company for 5 years. The par value of the stock is $1. At December 31, 2021, the fair value of the stock is $180,000.

(a) Prepare the journal entries to record the restricted stock on January 1, 2020 (the date of grant) and December 31, 2021.
(b) On February 22, 2022, the CEO leaves the company. Prepare the journal entry (if any) to account for this forfeiture.

Answer 1

Jan-01

Dr Unearned compensation $260,000

Cr common stock $10,000

Cr Paid in capital in excess of par $250,000

Dec-31

Dr Compensation expense $52,000

Cr unearned compensation $52,000

(b)

Feb-22

Dr Common stock $10,000

Dr Paid in capital in excess of par $250,000

Cr Compensation expense $104,000

Cr Unearned compensation $156,000

Step-by-step explanation:

Holt Company

(a)

Jan-01

Dr Unearned compensation $260,000

Cr common stock $10,000

($10,000*1)

Cr Paid in capital in excess of par $250,000

Dec-31

Dr Compensation expense $52,000

Cr unearned compensation $52,000

($260,000/5)

(b)

Feb-22

Dr Common stock $10,000

Dr Paid in capital in excess of par $250,000

Cr Compensation expense $104,000

Cr Unearned compensation $156,000

($52,000*3)