Question

Allied Paper Products, Inc., offers a restricted stock award plan to its vice presidents. On January 1, 2021, the company granted 20 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market price of $5 per share on the grant date.

Required:

1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.

Answer 1

1
	Total compensation cost	100	million	=20*5
2
Date	General Journal	Debit	Credit
December 31, 2021	Compensation expense	50		=100/2
	Paid-in capital—restricted stock		50
December 31, 2022	Compensation expense	50
	Paid-in capital—restricted stock		50
December 31, 2022	Paid-in capital—restricted stock	100
	Common stock		20
	Paid-in capital—excess of par		80