Question

On January 1, 2021, David Mest Communications granted restricted stock units (RSUs) representing 40 million of its $1 par common shares to executives, 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. The common shares had a market price of $15 per share on the grant date. At the date of the grant, Mest anticipated that 6% of the recipients would leave the firm prior to vesting. On January 1, 2022, 5% of the RSUs are forfeited due to executive turnover. Mest chooses the option to account for forfeitures when they actually occur.

Required:

1. to 3. Prepare the appropriate journal entries to record compensation expense on December 31, 2021, December 31, 2022, and December 31, 2023. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

1) Total compensation cost = option granted*fair value
total compensation cost = 40 million*15 = 600 million
2) Journal entry figures in million
Date	Particulars	debit	credit
31-12-2021	compensation exp (600/3)	200
	paid in capital-restricted stock		200
31-12-2022	compensation exp	180
	paid in capital-restricted stock		180
31-12-2023	compensation exp	190
	paid in capital-restricted stock		190

WORKING NOTE
compensation exp (600*95%*2/3)-200	180
compensation exp (600*95%-200-180)	190

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