On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 23 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. On the grant date, the shares had a market price of $3.90 per share. Required: 1. Determine the total compensation cost pertaining to the RSUs. 2. Prepare the appropriate journal entry to record the award of RSUs on January 1, 2021. 3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021. 4. Prepare the appropriate journal entry to record compensation expense on December 31, 2022. 5. Prepare the appropriate journal entry to record compensation expense on December 31, 2023. 6. Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, 2023.

Question

Emerson Garner

Business

21 January, 10:23

On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 23 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. On the grant date, the shares had a market price of $3.90 per share. Required: 1. Determine the total compensation cost pertaining to the RSUs. 2. Prepare the appropriate journal entry to record the award of RSUs on January 1, 2021. 3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021. 4. Prepare the appropriate journal entry to record compensation expense on December 31, 2022. 5. Prepare the appropriate journal entry to record compensation expense on December 31, 2023. 6. Prepare the appropriate journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, 2023.

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Answers (1)

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Carter Dunn · Answer 1

1. Total compensation cost pertaining to the RSUs

=$89.7 million

2.

No entry is made on the grant date

3 - 5

Dr Compensation expense 29.9

Cr Paid-in capital-restricted stock 29.9

6.

Dr Paid-in capital-restricted stock 89.7

Cr Common stock

Cr Paid-in capital-excess of par (remainder) 66.7

Explanation:

Tru Fashions Corporation

1. Total compensation cost pertaining to the RSUs

23 million*market price of $3.90 per share

=$89.7 million

2.

No entry is made on the grant date

3 - 5

The entry is the same for years 2021 - 2023

Dr Compensation expense 29.9

($89.7 million : 3 years)

Cr Paid-in capital-restricted stock 29.9

6.

Dr Paid-in capital-restricted stock 89.7

Cr Common stock (23 million shares x $1 par) 23

Cr Paid-in capital-excess of par (remainder) 66.7