Question

(Accounting for Restricted Stock) Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2017. The stock has a fair value of \(500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2021. The par value of the stock is \)10. At December31, 2017, the fair value of the stock is $450,000.

Instructions

(a) Prepare the journal entries to record the restricted stock on January 1, 2017 (the date of grant), and December 31, 2018.

(b) On July 25, 2021, Tokar leaves the company. Prepare the journal entry (if any) to account for this forfeiture

Short answer

(a) Unearned compensation will be debited by $500,000, and common stock and paid in capital in excess of par- common stock will be credited by $100,000 and $400,000, respectively. Compensation expense will be debited, and unearned compensation will be credited by $100,000, respectively.

(b) Common stock and paid In capital in excess of par- common stock will be debited by $100,000 and $400,000, respectively, and compensation expense and unearned compensation will be credited $400,000 and $100,000, respectively.

Step-by-step solution

(a) Journal Entry

Date	Accounts and Explanation	Debit	Credit
January 1, 2017	Unearned Compensation	$500,000
	Common Stock ($10 X 10,000)		$100,000
	Paid-in Capital in Excess of Par— Common Stock (Bal. fig.)		$400,000
December 31, 2018	Compensation Expense ($500,000 / 5)	$100,000
	Unearned Compensation		$100,000

(b) Journal Entry

Date	Accounts and Explanation	Debit	Credit
July 25, 2021	Common Stock	$100,000
	Paid-in Capital in Excess of Par—Common Stock	$400,000
	Compensation Expense		$400,000
	Unearned Compensation		$100,000