Problem 1 Share based compensation 1. (8 points) On January 1, 2021, Crown Co. awarded restricted stock units (RSUs) representing 21 million of its $2 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. On the grant date, the shares had a market price of $6 per share. Required: a. Determine the total compensation cost pertaining to the RSUs. b. Prepare the appropriate journal entries related to the RSUs for December 31, 2023. Assume all key personnel still employed by the company throughout.

2. (14 points) Under its executive stock option plan, Brown Inc. granted options on January 1, 2021, that permit executives to purchase 8 million of the company's $3 par common shares within the next nine years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $13 per share. The fair value of the options, estimated by an appropriate option pricing model, is $7 per option. Managements policy is to estimate forfeiture. Currently no forfeitures are anticipated. Required: a. Ignoring taxes, what is the total compensation cost pertaining to the stock options? b. Prepare the journal entry on December 31, 2021. What is the effect on earnings in the year after the options are granted to executives? c. Suppose that unexpected turnover during 2022 caused the forfeiture of 10% of the stock options. Prepare the appropriate journal entry on December 31, 2022. d. Another unexpected turnover happens in 2023 causing forfeiture to increase to 30% of the original stock option. Prepare the appropriate journal entry on December 31, 2023 and December 31, 2024.