Magnetic-Optical Corporation 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 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, 2021.

3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.

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

See the explanation for the answers .

Explanation:

1. Total compensation cost is determined as follows;

     $22.5                 fair value per share

    x 4 million           shares granted

    = $90 million      fair value of award

2.  There is no entry required

3.                                          

                                                                                    ($ in millions)

Compensation expenses ($90 million /3 years)               30

Paid in capital- restricted stock                                          30

4.

      $22.5                     fair value per share

      x 4 million              shares granted

      x 90%                    100% - 10% forfeiture rate

     = $81 million           fair value of award

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20