If restricted stock is forfeited because an employee leaves the company, the appropriate accounting procedure is to:
A) Reverse related entries previously made.
B) Do nothing.
C) Prepare correcting entries.
D) Record an income item.

Question

Quizplus · Accepted Answer

If restricted stock is forfeited because an employee leaves the company, it means that the employee did not satisfy the necessary conditions to have the stock restrictions lifted. Therefore, any related entries previously made for that employee should be reversed to reflect the forfeiture. This could involve reversing entries related to expense recognition, such as compensation expense or any related tax withholdings.

If Restricted Stock Is Forfeited Because an Employee Leaves the Company