Question

Mann Inc. offers a restricted stock award plan to its vice presidents. On January 1, 2021, the corporation granted 10 million of its $5 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market value of $10.3 per share on the date the award is granted. Required: 1. Assume that no shares are forfeited. Determine the total compensation cost pertaining to the restricted shares. 2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.

Answer 1

1.$103 million fair value of award

2.

December 31, 2022 ($ millions)

Dr Compensation expense 51.5

Cr Paid-in capital—restricted stock 51.5

December 31, 2022

Dr Compensation expense 51.5

Cr Paid-in capital—restricted stock 51.5

Dr Paid-in capital—restricted stock 103

Cr Common stock 50

Cr Paid-in capital—excess of par (remainder)53

Step-by-step explanation:

Mann Inc Journal entries

1)

$10.3 fair value per share x 10 million shares granted

= $103 million fair value of award

2.

December 31, 2022 ($ millions)

Dr Compensation expense ($103million ÷ 2 years) 51.5

Cr Paid-in capital—restricted stock 51.5

December 31, 2022

Dr Compensation expense ($103million ÷ 2 years) 51.5

Cr Paid-in capital—restricted stock 51.5

Dr Paid-in capital—restricted stock 103

Cr Common stock (10 million shares x $ 5par) 50

Cr Paid-in capital—excess of par (remainder)53