Question

On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 14 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 $6.30 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.
Prepare the appropriate journal entries. (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 rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

1) Total compensation cost = option granted*fair value
total compensation cost = 14million*6.30 = 88.2 million
2) Journal entry figures in million
Date	Particulars	debit	credit
01-01-2021	NO entry
31-12-2021	compensation exp (88.2/3)	29.4
	paid in capital-restricted stock		29.4
31-12-2022	compensation exp	29.4
	paid in capital-restricted stock		29.4
31-12-2023	compensation exp	29.4
	paid in capital-restricted stock		29.4
31-12-2023	paid in capital -restricted stock	88.2
	common stock		14
	paid in capital excess of par-common stock		74.2

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