Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under itsrestricted stock unit plan, the company on January 1, 2018, granted restricted stock units (RSUs) representing4 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 $22.50 per share on the grantdate. Management’s policy is to estimate forfeitures.Required:1. Determine the total compensation cost pertaining to the RSUs.2. Prepare the appropriate journal entry to record the RSUs on January 1, 2018.3. Prepare the appropriate journal entry to record compensation expense on December 31, 2018.4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the RSUs prior to vesting. Determine the totalcompensation cost.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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
4 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 $22.50 per share on the grant
date. Management’s policy is to estimate forfeitures.
Required:
1. Determine the total compensation cost pertaining to the RSUs.
2. Prepare the appropriate journal entry to record the RSUs on January 1, 2018.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2018.
4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the RSUs prior to vesting. Determine the total
compensation cost.

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