Homework Answers
Requirement#1)
Total compensation cost of Restricted Stock Units(RSUs) :
= Fair market value per share x No. Of shares awarded
=$15 x 33 million shares
=$ 495 million
Expense allocated per year :
=Total compensation cost of RSUs ÷ Vesting period
=$495 million / 3 yrs
=$165 million
| Date | Account titles & explanations | Debit | Credit | ||||
| Dec 31,2017 | Compenstion expense | $165 million | |||||
|
Paid in capital Restricted Stock (To record compensation expense) |
$165 million | ||||||
| Dec 31,2018 | Compesation expense | $165 million | |||||
|
Paid in capital Restricted stock (To record compensation expense) |
$ 165 million |
||||||
Requirement#2)
Total compensation is $ 495 million out of which $ 330 million is expensed. Balance remaining is $165 million.
No. of shares that can be bought back with balance remaining :
= $165 million ÷ Average market price per share
=$165 million ÷ 15
= 11 million shares
So,
33 million - 11 million = 22 million shares.
Thus, 33 million shares would buy back 11 million shares and increase the denominator of diluted eps by 22 million shares.
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