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16 January, 08:08

On January 1, 2021, Cobbler Corporation awarded restricted stock units (RSUs) representing 29.7 million of its $1 par common shares to key officers, 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 $5.2 per share. Required: 1. Determine the total compensation cost pertaining to the RSUs. 2. to 6. Prepare the appropriate journal entries.

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  1. 16 January, 08:12
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    Answer and Explanation:

    The computation and the journal entries are shown below:

    1) Total compensation cost

    = Common shares * market price per share

    = 29,700,000 * $5.2

    = $154,440,000

    2) The journal entries are shown below:

    On Jan 1 2021

    No journal entry is required for awarded the restricted stock units

    On Dec 12 2021

    Compensation expense (154,440,000 : 3 years) $5,1480,000

    Paid-in capital - restricted stock $51,480,000

    (Being the compensation expense is recorded)

    For recording this we debited the compensation expense as it increased the expenses and credited the paid in capital as it increased the equity

    On Dec 31 2022

    Compensation expense (154,440,000 : 3 years) $5,1480,000

    Paid-in capital - restricted stock $51,480,000

    (Being the compensation expense is recorded)

    For recording this we debited the compensation expense as it increased the expenses and credited the paid in capital as it increased the equity

    On Dec 31 2023

    Compensation expense (154,440,000 : 3 years) $5,1480,000

    Paid-in capital - restricted stock $51,480,000

    (Being the compensation expense is recorded)

    For recording this we debited the compensation expense as it increased the expenses and credited the paid in capital as it increased the equity

    On Dec 31 2023

    Paid-in capital - restricted stock $154,440,000

    Common stock (29.7 million * $1) $29,700,000

    Paid-in capital - excess of par $124,740,000 (Balancing figure)

    (Being the lifting of restrictions and issuance of the shares is recorded)

    For recording this we debited the paid in capital as it decreased the equity and credited the paid in capital and common stock as it increased the equity
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