Question

PHN Foods granted 18 million of its no-par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $5 per share on January 1, 2020, the grant date. Required: 1. What journal entry will PHN Foods prepare to record executive compensation regarding these restricted shares at December 31, 2020 and December 31, 2021

Answer 1

The journal entry are shown below:

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Computation:

Total compensation = 18 million × $5 = $90 million

Time period = 3 years

So compensation per year = $30 million

The journal entry are as follows:

Dec.31 2020 Compensation expense A/c Dr. $30 million

To Restricted stock- paid in capital A/c $30 million

Dec.31 2021 Compensation expense A/c Dr. $30 million

To Restricted stock- paid in capital A/c $30 million

(Being executive compensation is recorded)