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28 November, 11:28

On January 1, 2016, VKI Corporation awarded restricted stock units (RSUs) representing 9 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. On the grant date, the shares had a market price of $7.80 per share. Required:1.) Determind the total compensation cost pertaining to the RSU's2.) Prepare the appropriate journal entriesRecord the award of RSU's on January 1, 2016. Record the Compensation expense on December 31, 2016. Record the Compensation expense on December 31, 2017. Record the Compensation expense on December 31, 2018. Record the lifting of restrictions on the RSU's and issuing shares at December 31, 2018.

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  1. 28 November, 14:07
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    The computation of the total compensation cost pertaining to the RSU is shown below:

    = Number of restricted stock * market price per share

    = 9 million shares * $7.80

    = $70.2 million

    The journal entries are shown below:

    On January 1, 2016

    No journal entry is required

    On December 31, 2016

    Compensation expense A/c Dr $23.4 million ($70.2 : 3 years)

    To Paid-in capital-restricted stock $23.4 million

    (Being the compensation expense is recorded)

    On December 31, 2017

    Compensation expense A/c Dr $23.4 million ($70.2 : 3 years)

    To Paid-in capital-restricted stock $23.4 million

    (Being the compensation expense is recorded)

    On December 31, 2018

    Compensation expense A/c Dr $23.4 million ($70.2 : 3 years)

    To Paid-in capital-restricted stock $23.4 million

    (Being the compensation expense is recorded)

    On December 31, 2018

    Paid-in capital-restricted stock $70.2 million

    To Common stock A/c $9 million (9 million shares * $1)

    To Paid-in capital - the excess of par $61.2 million

    (Being the share issued and lifting of restrictions is recorded)
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