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			113,844					$	21.46
Granted			53,764						30.95
Vested			(47,950	)					17.04
Forfeited			(15,267	)					25.39
Unvested at December 31, 2015			104,391					$	27.70

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

ANSWER

1) Total Compensation expense of stock units granted this year = 53,764,000*30.95 =1,663,995,800

This amount will be vested in 4 years hence will be divided by 4 to calculate per year compensation exp based on slm method = 1,663,995,800 / 4 = 415,998,950

2) Cash received Common stock = Vested share * Amount per share

= 47,950,000*0.000006 = 288

Paid in capital - Restricted stock = 47,950,000*17.04 = 817,068,000

Paid in capital - excess of par = 817,068,000- 288= 817,067,712

Journal entry

Paid in capital - restricted stock (Debit) 817,068,000

Common stock 288

Paid in capital - Excess of par 817,067,712

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