On December 31 of Year 1, Mars 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 Mars 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 of Year 1, 25,800 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.

Required
a. Compute the total amount of compensation cost for the restricted stock unit plan.
b. Prepare the journal entry on the date of grant, December 31 of Year 1.
c. Prepare the journal entry on December 31 of Year 2.
d. Prepare the journal entry on December 31 of Year 3. At that time, the company adjusts its estimate of
forfeitures to 10%.
e. Prepare the journal entries on December 31 of Year 4 to record (1) compensation expense and (2) distribution
of shares, assuming actual forfeitures of 2,064 shares in Year 4.

Note: If a journal entry isn't required on any of the dates shown, select "N/A—debit" and "N/A—credit" as the account names and leave the Dr. and Cr. answers blank (zero).

 

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Date b. Dec. 31, Year 1 N/A-debit Account Name N/A-credit To record compensation cost. c. Dec. 31, Year 2 Compensation Expense Dec. 31, Year 4 Paid-in Capital-Restricted Stock To record adjusting entry. d. Dec. 31, Year 3 Compensation Expense Paid-in Capital-Restricted Stock To record adjusting entry. e. Dec. 31, Year 4 Compensation Expense Paid-in Capital-Restricted Stock To record adjusting entry. Paid-in Capital-Restricted Stock Common Stock Paid-in Capital in Excess of Par-Common Stock To record distribution of shares. P Dr. 0 0 182,750 0 182,750 0 0 0 0 O O 0 Cr. 0 0 0 182,750 L 0x 182,750 * 0x 0x 0x 0x 0x Date b. Dec. 31, Year 1 N/A-debit Account Name N/A-credit To record compensation cost. c. Dec. 31, Year 2 Compensation Expense Dec. 31, Year 4 Paid-in Capital-Restricted Stock To record adjusting entry. d. Dec. 31, Year 3 Compensation Expense Paid-in Capital-Restricted Stock To record adjusting entry. e. Dec. 31, Year 4 Compensation Expense Paid-in Capital-Restricted Stock To record adjusting entry. Paid-in Capital-Restricted Stock Common Stock Paid-in Capital in Excess of Par-Common Stock To record distribution of shares. P Dr. 0 0 182,750 0 182,750 0 0 0 0 O O 0 Cr. 0 0 0 182,750 L 0x 182,750 * 0x 0x 0x 0x 0x