Question

Accounting for Restricted Stock

Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2017. The stock has a fair value of $500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2021. The par value of the stock is $10. At December 31, 2017, the fair value of the stock is $450,000.

Instructions

(a) Prepare the journal entries to record the restricted stock on January 1, 2017 (the date of grant), and December 31, 2018.

(b) On July 25, 2021, Tokar leaves the company. Prepare the journal entry (if any) to account for this forfeiture.

Answer 1

Answer
Journal Entry
a)
Date	Account titles and explanation	Debit	Credit
01-01-2017	Unearned compensation	$ 5,00,000
	To, Common stock (10,000 * $10)		$ 1,00,000
	To, Paid-in capital in excess of par - common stock		$ 4,00,000
	(To record the issuance of restricted stock)
31-12-2018	Compensation Expense (500,000/5)	$ 1,00,000
	To, Unearned compensation		$ 1,00,000
	(To record compensation expense for the year)
b)
Date	Account titles and explanation	Debit	Credit
25-07-2021	Comments stock	$ 1,00,000
	Paid-in capital in excess of par - common stock	$ 4,00,000
	To, Compensation expense		$ 4,00,000
	To, Unearned compensation		$ 1,00,000
	(To record forfeiture of restricted stock)