A company granted 36 million of its no-par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $13 per share on January 1, Year 1, the grant date.

Required:

What journal entry will the company prepare to record executive compensation regarding these restricted shares at December 31, Year 1 and December 31, Year 2?

When calculating diluted EPS at December 31, Year 2, what will be the net increase in the weighted average number of common shares with regard to the restricted stock shares if the market price of the common shares averages $13 per share during Year 2?