Check my work Brief Exercise 19-2 Restricted stock units [L019-1] 2 points Secon

Question

Check my work Brief Exercise 19-2 Restricted stock units [L019-1] 2 points Second Link Services granted restricted stock units sus representing 11 million of its $1 par common shares to executives subiect forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $22 per share on the grant date. eBook1.Ignoring taxes, what is the total compensation cost pertaining to the restricted stock units? (Enter your answer in millions (i.e. 0,000,000 should be entered as 10).) 2. Ignoring taxes, what is the effect on earnings in the year after the RSUs are granted to executives? (Enter your answer in millions Print Referencesrounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Total compensation cost Effect on earnings decreased by million 2. million

Explanation / Answer

SOLUTION

1. Total compensation cost of RSUs-

= Fair market value per share * Number of shares awarded to executives

= $22 * 11,000,000 shares = $242,000,000

2. Effect of RSUs on net earnings-

The total compensation cost of RSUs is apportioned t record as an expense over the vesting period of 4 years.

Expense allocated each year = Total compensation cost of RSUs / Vesting period

= $242,000,000 / 4 years = $60,500,000

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