Chatham Inc. purchased an option to buy 10,000 of its common shares for $35 each. The option cost $750, and explicitly stipulates that it may only be settled by exercising the option and buying the shares.
Instructions
(a) Provide the journal entry required to account for the purchase of the call option assuming Chatham Inc. complies with IFRS.
(b) Assume that the contract allows both parties a choice to settle the option by either exchanging the shares or settling on a net basis. Would this change your conclusion in part (a)?
(c) Assume that Chatham Inc. complies with ASPE. Would this change your conclusion in part (a)?