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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Restricted Share Units On January 2, 2019, Dekker Company grants each of its 15 new employees 200 restricted share units. Each of the time-vested restricted share units entitles the employee to receive one share of Dekker common stock if they remain an employee of the company for 2 years. On January 2, 2019, shares of Dekker’s $2 par value common are trading at $52 per share. Dekker estimates that 12 of the 15 employees will complete 2 years of service with the company. At the end of 2020, Dekker reported that four employees left the company before completing the service period.

Required:

  1. 1. Prepare a schedule of Dekker s computations for its restricted share unit plan for 2019 and 2020 (round all computations to the nearest dollar).
  2. 2. Prepare all journal entries for the restricted share unit plan for 2019 and 2020.

1.

To determine

Prepare a schedule of Company D’s computations for its restricted share unit plan for 2019 and 2020.

Explanation

Restricted Share Units (RSUs): This is the right of the employee to receive a certain number of shares of stock of the company.

Prepare a schedule of Company D’s computations for its restricted share unit plan for 2019 and 2020:

Particulars20192020
Estimated (actual) total compensation cost$124,800 $114,400
Fraction of service expired× 0.5 years× 1 years
Estimated compensation expense to date62,400114,400
Previously recognized compensation expense0(62,400)
Current compensation expense$62,400$52,000

Table (1)

Working Note 1: Compute the total compensation cost of RSUs for the year 2019.

Total compensationcost of RSUs} = {Fair market value per share × Number of shares awarded to executive×(Number of executives estimated to complete service period)}= $52 × 200 shares×12 executives= $124,800

Working Note 2: Compute the total compensation cost of RSUs for the year 2019

2.

To determine

Prepare the required journal entries for the restricted share unit plan for 2019 and 2020.

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