Problem:
On January 1, 2013, VKI Corporation awarded 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. On the grant date, the shares have a market price of $2.50 per share.
Required:
Question 1: Determine the total compensation cost pertaining to the restricted shares.
Question 2: Prepare the appropriate journal entry to record the award of restricted shares on January 1, 2013.
Question 3: Prepare the appropriate journal entry to record compensation expense on December 31, 2013.
Question 4: Prepare the appropriate journal entry to record compensation expense on December 31, 2014.
Question 5: Prepare the appropriate journal entry to record compensation expense on December 31, 2015.
Question 6: Prepare the appropriate journal entry to record the lifting of restrictions on the shares at December 31, 2015.
Note: Please show how you came up with the solution.