Question

Friend Connection Inc. included the following disclosure note in an annual report:

Share-Based Compensation (in part)

. . . compensation expense related to these grants is based on the grant date fair value of the RSUs and is recognized on a straight-line basis over the applicable service period.

The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2015:

	Unvested RSUs
	Number of Shares (in thousands)						Weighted Average Grant Date Fair Value
Unvested at December 31, 2014			116,444					$	21.72
Granted			55,059						34.00
Vested			(49,250	)					17.30
Forfeited			(16,567	)					25.65
Unvested at December 31, 2015			105,686					$	29.00

Required:

1. Assuming a four-year vesting period, how much compensation expense did Friend Connection report in the year ended December 31, 2016, for the restricted stock units granted during the year ended December 31, 2015?
2. Based on the information provided in the disclosure note, prepare the journal entry that summarizes the vesting of RSUs during the year ended December 31, 2015. (Friend Connection's common shares have a par amount per share of $0.000006.

Answer 1

1. Compensation Expense for the shares granted during theyear:

Shares Granted during the year : 55156' (000s)

Vesting Period = 4 Years

Compensation Expense = (Shares Granted during the year/ VestingPeriod)* Fair Value of Shares at the grant date

Compensation Expense for the year ended Dec 2016 = 13789*34.23 =471997 $ (000's)

2. Compensation Expenses - Accounting Entry

Compensation expense to be accounted based on the Fair Value atthe grant date for the shares that are actually vested for theparticular year.

Shares Vested during the year : 49350 shares

Weighted Fair Value of Shares - 17.32$ per share

Value of Compensation expense = 49350*17.32$ = 854742 $(000's)

Accounting Entry:

Debit Share Based Compensation Expense -854742 $ (000's)

Credit Equity - 854742 $ (000's)