Question

On January 1, 2018, Liberty Company granted restricted stock units (RSUs) representing 40 million of its $1 par common shares to executives. The RSUs are subject to forfeiture if employment is terminated within four years. The company will distribute the shares after the recipients of the RSUs satisfy the vesting requirement. The common shares had a market price of $10 per share on the grant date. At the date of grant, Liberty anticipated that 5% of the recipients would leave the firm prior to vesting. Ignore taxes.

Required:

1. Prepare the appropriate journal entry to record compensation expense on December 31, 2018

2. Prepare the appropriate journal entry to record compensation expense on December 31, 2019

3. During 2020, the third year, Liberty revised its estimate of forfeitures from 5% to 10%. Prepare the appropriate journal entry to record compensation expense on December 31, 2020.

4. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.

Answer 1