(Call Option) The treasurer of Miller Co. has read on the Internet that the stock price of...
Question:
(Call Option) The treasurer of Miller Co. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Ewing common shares on July 7, 2006, for $240. The call option is for 200 shares (notional value), and the strike price is $70. The option expires on January 31, 2007. The data shown on page 898 are available with respect to the call option.
Instructions Prepare the journal entries for Miller Co. for the following dates.
(a) July 7, 2006—Investment in call option on Ewing shares.
(b) September 30, 2006—Miller prepares financial statements.
(c) December 31, 2006—Miller prepares financial statements.
(d) January 4, 2007—Miller settles the call option on the Ewing shares.
Step by Step Answer:
Intermediate Accounting 2007 FASB Update Volume 2
ISBN: 9780470128763
12th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield