Question

On January 1, 2018, David Mest Communications granted restricted stock units (RSUs) representing 25 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 $18 per share on the grant date. At the date of grant, Mest anticipated that 5% of the recipients would leave the firm prior to vesting. On January 1, 2019, 4% 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 entry to record compensation expense on December 31, 2018, December 31, 2019, and December 31, 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

No	Date	General Journal	Debit	Credit
1	Dec 31, 2018	Compensation Expense ($450 / 3years )	$150
		Paid in Capital, restricted stock		$150
2	Dec 31, 2019	Compensation Expense [ { ($450 - ($450*4%)) * 2 / 3 years} - $150]	$138
		Paid in Capital, restricted stock		$138
3	Dec 31, 2020	Compensation Expense [ { ($450 - ($450*4%)) * 3 / 3 years} - $150 - $138]	$144
		Paid in Capital, restricted stock		$144

Total Compensation Expense = Estimated fair per option * No. of RSU granted

= $18 * $25 = $450

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