Recording Entries for Restricted Stock Unit Plan with Estimated Forfeitures On December 31, 2020, 5M Inc. approved a restricted stock unit plan to be awarded to executives. The plan included the following general terms. Each restricted stock unit is equivalent to one share of $1 par value, common stock of 5M Inc. Restricted stock units vest three years after the date of grant, subject to forfeiture if employment is terminated prior to the end of the vesting period. Shares are distributed after the vesting period if the employee is still employed by the company. On December 31, 2020, 90,000 restricted stock units were granted to key employees under this plan when the market price of the common stock was $25 per share. The company estimates that 15% of the restricted stock units will be forfeited and it is the company's policy to estimate forfeitures. d. Prepare the journal entry on December 31, 2022. At that time, the company adjusts its estimate of forfeitures to 10%. e. Prepare the journal entries on December 31, 2023, to record compensation expense and distribution of shares, assuming actual forfeitures of 7,200 shares in 2023. Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Recording Entries for Restricted Stock Unit Plan with Estimated Forfeitures

On December 31, 2020, 5M Inc. approved a restricted stock unit plan to be awarded to executives. The plan included the following general terms.

Each restricted stock unit is equivalent to one share of $1 par value, common stock of 5M Inc.
Restricted stock units vest three years after the date of grant, subject to forfeiture if employment is terminated prior to the end of the vesting period.
Shares are distributed after the vesting period if the employee is still employed by the company.

On December 31, 2020, 90,000 restricted stock units were granted to key employees under this plan when the market price of the common stock was $25 per share. The company estimates that 15% of the restricted stock units will be forfeited and it is the company's policy to estimate forfeitures.

d. Prepare the journal entry on December 31, 2022. At that time, the company adjusts its estimate of forfeitures to 10%.

e. Prepare the journal entries on December 31, 2023, to record compensation expense and distribution of shares, assuming actual forfeitures of 7,200 shares in 2023.

Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order.
Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

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