Share-Based Compensation and Earnings Per Share

Grant Date

Date the employer formally implements the compensation plan

Service Period

Period over which the employee earns the compensation and employer records expense

Vest

To secure an unconditional legal right to the compensation

Vesting Date

Date when the compensation vests

Vesting Period

Period between the grant date and the vesting date

Settlement Date

Date the employee receives the compensation

What is restricted stock subjected to?

1. Employment conditions

2. restrictions on use of shares

Unearned Compensation-Equity

a contra equity account, used to record the issuance of restricted stock that has been granted to employees but has not yet been earned due to unmet vesting conditions

Paid-in Capital-Restricted Stock

This account is used after the RSUs have vested and are converted into actual shares of restricted stock.

Compensation Expense

refers to the cost incurred by a company to compensate its employees for their services

What is the journal entry for restricted stock on the grant date?

Dr. Unearned Compensation-Equity

Cr. Common Stock

Cr. Paid in Capital- Common Stock

What is the journal entry for restricted stock at the end of each period?

Dr. Compensation Expense

Cr. Unearned Compensation

What is the journal entry for the forfeiture of stock rewards?

Dr. Common Stock

Dr. PIC- Common Stock

Cr. Compensation Expense (all years)

Cr. Unearned Compensation