Please explain! The Peach Corporation provides restricted stock to certain execu
ID: 2585469 • Letter: P
Question
Please explain!
The Peach Corporation provides restricted stock to certain executives. Under the plan, the company granted 30 milion shares on January 1, 2016, which vest in four years. The fair value of the shares s 30No forfeiture aicipted lgnore taxes Required: 1. Determine the total compens ation cost pertaining to the restricted stock. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10.) Total compensali 39X million 2. &3. Prepare the appropriate joumal entry Oif any). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e. 5,500,000 should be entered as 5.50).) Date General Journal Debit Credit January 01, 2016 Compensation expense 20 Paid-in capital-excess of par 20 December 31, 2016 Red cest ind cates no response a expected in a cell no points deductedExplanation / Answer
Answer 1
Total Compensation cost = Number of restricted shares granted * Fair Valur per Share
= 30 million shares * $13 = $390 million
Note : Now this compensation cost computed above shall be allocate in the vesting period ie in 4 years. that means the compensation cost shall be recorded on 31 December of each year from 2016 to 2019.ie $390 million / 4 years = $97.50 million per year
Moreover on January 1 2016 only information is provided about the issunce of restricted stock & vesting period but no tranaction incures on that date as compensation cost shall be recorded at the end of the year & restricted stock will be issue after vesting period of 4 years thus there will be "No entry " recorded on Jan 1 , 2016 .
Journal Entry
Date General Journal Debit ($) Credit ($) January 01,2016 No Journal Entry Required December 31 , 2016 Compensation expense 97.50 Paid in capital – Restricted Stock 97.50 (To record compensation expense for the year 2016)