As part of its stock-based compensation package, on January 1, 2016, Weldon Well

Question

As part of its stock-based compensation package, on January 1, 2016, Weldon Well Supplies granted restricted stock units (RSUs) representing 100,000 $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equal in value to the market price of those shares at exercise. The RSUs cannot be exercised until the end of 2019 (vesting date) and expire at the end of 2021. The $1 par common shares have a market price of $6 per share on the grant date. The fair value at December 31, 2016, 2017, 2018, 2019, and 2020, is $16, $12, $16, $10, and $12, respectively. All recipients are expected to remain employed through the vesting date.

Required: 1. to 4. Prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

The entry is the same for three years

journal entry to record the award of RSUs on January 1,2016 NO Entry is made on the grant date journal entry to record compensation expense on December 31, 2016 Compensation expense (100000*6/3) 200000 Paid-in capital—restricted stock 200000

The entry is the same for three years

journal entry to record the lifting of restrictions on the RSUs and issuing shares at December 31, Paid-in capital—restricted stock 600000 Common Stock (100000*1) 100000 Paid-in capital—excess of par (remainder) 500000

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