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 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.

For the year ended December 31, 2017, ignoring taxes, the effect of the transaction is to

C. increase liability by 267,000 (approx.) B. increase paid-in capital by $400,000 A. Increase liability by $200,000 D. None of the other answer choices are correct

Explanation / Answer

D. None of the other answer choices are correct

25% of 100000 shares ,ie.25000 shares vest each year.So, the journal entry for yr ended dec 31,2017 will be :

Debit Compensation expense (25000*12) 300000

Credit Common stock (25000*1) 25000

Credit Paid-in capital (25000*11) 275000

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