Chapter 16: Restricted Stock

Question 1

———— Background Information ———

On January 1, 2022, Pumpkin Corporation issues 4,000 shares of restricted stock to the CEO, Charlie Brown.

On January 1, 2022, Pumpkin Corporation’s stock price is $60 per share for $1 par value stock. The vesting period for the restricted stock is 5 years.

———— Question———
How does Pumpkin Corporation reflect this restricted stock in its financial statements?

Answer 1

At the grant date:
Dr. Unearned Compensation 240,000
Cr, Common Stock, $1 par value 4,000
Cr. APIC – Common Stock 236,000

At the end of each of the five years in the vesting period, Pumpkin Corporation will recognize 1/5
of the expense:

Dr. Compensation Expense 48,000
Cr. Unearned Compensation 48,000