Question

Allied Paper Products, Inc., offers a restricted stock award plan to its vice presidents. On January 1, 2021, the company granted 15 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market price of $6 per share on the grant date.

Required:
1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2019.

Answer 1

Answer: See explanation

Step-by-step explanation:

1. Determine the total compensation cost pertaining to the restricted shares.

This will be:

= 15 million × $6

= $90 million

2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.

December 31, 2021

Dr Compensation expense = 90/2 = $45 million

Cr Paid-in capital—restricted stock = $45 million

December 31, 2022

Dr Compensation expense = $45 million

Cr Paid-in capital—restricted stock = $45 million

December 31, 2022

Dr Paid-in capital—restricted stock = $90 million

Cr Common stock = $15 million

Cr Paid-in capital—excess of par = $75 million