Accounting for Restricted Stock Awards Geelong Technology (GT) is a software com
ID: 2329133 • Letter: A
Question
Accounting for Restricted Stock Awards
Geelong Technology (GT) is a software company based in Boston. Since January 1, 2015, the company has granted restricted stock to its CEO at the beginning of each year to help boost future company performance. Vesting for each award occurs if the CEO stays employed at the company for a period of two years from the grant of the award.
The par value of the stock is $1.
Grant Date
Number of shares
Fair value per share
Service period
1/1/2015
10,000
$6
1 year
1/1/2016
15,000
$8
2 years
1/1/2017
15,000
$10
2 years
1/1/2018
20,000
$11
3 years
It is now September 13, 2018 and the CEO leaves the company.
Create the Journal Entries with calculations in accordance for US GAAP for all events.
Grant Date
Number of shares
Fair value per share
Service period
1/1/2015
10,000
$6
1 year
1/1/2016
15,000
$8
2 years
1/1/2017
15,000
$10
2 years
1/1/2018
20,000
$11
3 years
Explanation / Answer
Journal Entries
Grant date 1/1/2015 Contra Equity-Unearned Compensation Dr $ 60000
To Common stock & APIC-Common Stock $ 60000
(Being restricted stock recorded on grant date)
On 1/1/2016
Retained Earnings--SBC Expenses Dr $ 60000
To Contra equity-Unearned Compensation $ 60000
(As entry made for whole amount as its completion of service period of one year only)
1/1/2016 is grant date for 15000 shares, value is $ 120000 (15000×$8)
Contra equity-Unearned Compensation Dr $ 120000
To Common stock & APIC-Common Stock $ 120000
(Being grant date entry made)
On 1/1/2017 end of one year value is $ 60000 ($120000/2 service period)
Retained Earnings-SBC Expenses Dr $ 60000
To Contra Equity-Unearned Compensation $ 60000
(Entry made for completion of one year)
1/1/2017 Grant date for 15000 shares @ $10 service period 2 years, Value is $ 150000 (15000×$10)
Contra Equity-Unearned Compensation Dr $ 150000
To Common stock & APIC- Common stock $ 150000
(Being entry made for grant date)
On 1/1/2018 end of two years of share granted on 1/1/2016
Retained Earnings-SBS Expenses Dr $ 60000
To Contra Equity-Unearned Compensation $ 60000
(Being entry made for completion of two years)
On 1/1/2018 completion of one year of 15000 shares granted on 1/1/2018, value is $ 75000 ($150000÷2 years of service period)
Retained Earnings-SBC Expenses Dr $ 75000
To Contra Equity-Unearned Compensation $ 75000
(Being entry made for completion of one year)
On 1/1/2018 Grant date of 20000 shares @ $11, value is $ 220000
Contra Equity-Unearned Compensation Dr $ 220000
To Common stock & APIC- Common stock $ 220000
(Being grant date entry made)
On 13 September 2018 CEO leave the company and share granted on 1/1/2018 will be forfeited as the CEO leave the company before completion of vesting period and therefore stock based compensation (SBC) will be reversed via income statement.
Contra Equity-Unearned Compensation Dr $ 75000
To Retained Earnings-SBC Expenses $ 75000
(Being entry made for forfeiture of share as CEO left the organisation befor completion of vesting period)