Hammerstein Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock award plan, the company, on January 1, 2021, granted 2 million of its $1 par common shares to various division managers. The shares are subject to forfeiture if employment is terminated within four years. The common shares have a market price of $20 per share on the award date.
Required:
1. Determine the total compensation cost from these restricted shares. 2. & 3. Prepare the appropriate journal entries. 4. Suppose a 15% forfeiture rate was expected prior to vesting. Determine the total compensation cost, assuming the company follows the fair value approach and chooses to anticipate forfeitures at the grant date.
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