Question

Headland Company issues 3,600 shares of restricted stock to its CFO, Dane Yaping, on January 1, 2017. The stock has a fair value of $108,000 on this date. The service period related to this restricted stock is 4 years. Vesting occurs if Yaping stays with the company for 4 years. The par value of the stock is $5. At December 31, 2018, the fair value of the stock is $148,000. Prepare the journal entries to record the restricted stock on January 1, 201 and December 31, 2018. In addition,On March 4, 2019, Yaping leaves the company. Prepare the journal entry to account for this forfeiture.

Answer 1

a) Journal Entries on January 1, 2017 (Grant Date) and on 31 December 2018

Date	Account Titles and Explanation	Debit	Credit
1/1/17	Unearned Compensation	$108,000
	Common Stock (3,600 Shares X $5 per Share)		$18,000
	Paid-in Capital Excess of Par ($108,000-$18,000)		$90,000
	(to record the issue of restricted stock)
12/31/18	Compensation Expense ($108,000 / 4 years)	$27,000
	Unearned Compensation ($108,000 / 4 years)		$27,000
	(to record the compensation expenses)

(b) Journal Entries on March 4, 2019, Yaping leaves the company ( Forfeiture)

Date	Account Titles and Explanation	Debit	Credit
3/4/19	Common Stock (3,600 Shares X $5 per Share)	$18,000
	Paid-in Capital Excess of Par	$95,000
	Unearned Compensation (2 years X $27,000)		$54,000
	Compensation Expense (2 years X $27,000)		$54,000
	(To record the forfeiture of restricted stock)

Note : Compensation Expense and Unearned Expense is taken for 2 years each because service period of restricted stock is 4 years but it is forfeited in 2 years as yapping leaves the company after two years of  issues shares of restricted stock .

Thanks