Question
Lima Corp. offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2021, granted restricted
Lima Corp. offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2021, granted restricted stock units (RSUs) representing 7 million of its $1 par common shares to various division managers. The shares are subject to forfeiture if employment is terminated within three years. The common shares have a market price of $27.00 per share on the grant date. Managements policy is to estimate forfeitures. Required:
1. Determine the total compensation cost pertaining to the RSUs.
Total compensation cost:
2. Prepare the appropriate journal entry to record the RSUs on January 1, 2021.
Record the award of restricted shares on January 1, 2021:
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.
Record compensation expense on December 31, 2021:
4. Suppose Lima Corp. expected a 10% forfeiture rate on the RSUs prior to vesting. Determine the total compensation cost:
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