Financial Accounting Research Assignment

Acorn Limited is a listed company based in Vermont. On January 1, 2018, the company granted 1,000 share units to its CFO. Each share unit has a contractual service period of three years and a vesting condition based on the details below. At the end of 2020, each share unit is convertible into 100 common shares of Acorn Limited if both of the following criteria are met:

2018-2020 Accumulated company net income is greater than $5 million.

2018-2020 Stock price increase is greater than 25%.

On the grant date, the companys common shares had a fair value of $6 per share and the company was expected to meet both of the criteria above.

During 2018 and 2019, the company was expected to meet both of the criteria above. However, during 2020 the companys stock price decreased and the company did not meet the stock price increase criteria at the end of the year.

The companys accountant has asked for your help to check the compensation costs recorded for these share units during 2018-2019 and record the appropriate journal entry at the end of 2020.

Ignore the effects of taxes.

The answer should have these parts:

1.The first part of your report is the Question. In this section, you must identify the accounting problem. Be brief and precise. Try to write your question in one sentence. This section should not exceed two sentences.

2. The second part of your report is the Solution. In this section, you must clearly communicate your proposed solution to the accounting problem you identified in section one. Explain and lay out all of the steps involved in your solution. This will usually involve calculations and journal entries. Be sure to adequately answer the question from part one, including calculations and working. Your solution should be clear and understandable such that the reader does not have to read the authoritative literature for himself/herself. Please use in-text citations!

3. The third part of your report is the Authoritative Citation(s). In this section, you must list the titles of the citation(s) from the professional accounting literature upon which you based your solution.