Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2018, granted restricted stock units (RSUs) representing 21 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 $6.00 per share on the grant date. Managements policy is to estimate forfeitures.

Required:

1. Determine the total compensation cost pertaining to the RSUs.

2. & 3. Prepare the appropriate journal entries.

4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the RSUs prior to vesting. Determine the total compensation cost.