Question

On January 1, 2022 Crystal Company granted restricted stock units (RSUs) representing 32.5 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $7.0 per share on the grant date.

Required:
a. Determine the total compensation cost pertaining to the RSUs.
b. Prepare the appropriate journal entry to record the award of RSL's on January 1, 2021.
c. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.
d. Prepare the appropriate journal entry to record compensation expense on December 31, 2022.
e. Prepare the appropriate journal entry to record compensation expense on December 31, 2023.
f. Prepare the appropriate journal entry to record the lifting of restrictions on the RSL's and issuing shares at December 31, 2023.

Answer 1

a. Total compensation = $32,500,000 * $7.0 = $227,500,000

b. No Journal entry to award of award of RSL's on January 1, 2021.

c. Date Account titles Debit Credit

21-12-2021 Compensation Expenses $45,500,000

($227,500,000/5)

Paid in capital - Restricted stock $45,500,000

d. Date Account titles Debit Credit

21-12-2022 Compensation Expenses $45,500,000

($227,500,000/5)

Paid in capital - Restricted stock $45,500,000

e. Date Account titles Debit Credit

21-12-2023 Compensation Expenses $45,500,000

($227,500,000/5)

Paid in capital - Restricted stock $45,500,000

f. Date Account titles Debit Credit

21-12-2023 Paid in capital - Restricted stock $227,500,000

Common stock ($32,500,000 * 1) $32,500,000

Paid in capital - Excess of par balance $195,000,000