Allied Paper Products, Inc., offers a restricted stock award plan to its vice presidents. On January 1, 2021, the company granted 16 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market price of $5 per share on the grant date. Required: 1. Determine the total compensation cost pertaining to the restricted shares. 2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.

Question

Business

Gabriella Clark

10 April, 21:16

Allied Paper Products, Inc., offers a restricted stock award plan to its vice presidents. On January 1, 2021, the company granted 16 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market price of $5 per share on the grant date. Required: 1. Determine the total compensation cost pertaining to the restricted shares. 2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.

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Mary Orozco · Answer 1

1. $80,000,000

2. (The Journal entries can be found below)

Explanation

1. Fair value per share x shares granted = million fair value of award

=$5*$16,000,000 = $80,000,0000

The total compensation cost pertaining to the restricted shares is $80,000,000

2. Journal entries as at December 31, 2021. ($ in millions)

Dr Compensation expense ($80 million : 2 years) 40

Cr Paid-in capital-restricted stock 40

Journal entries as at December 31, 2022. ($ in millions)

Dr Compensation expense ($80 million : 2 years) 40

Cr Paid-in capital-restricted stock 40

Dr Paid-in capital-restricted stock 80

CrCommon stock (16 million shares x $1 par) 16

Cr Paid-in capital-excess of par (remainder) 64