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Blossom Company purchases a call option contract to purchase 510 shares of Crane Company stock on July 1, 2025. Crane is trading at $50 per
Blossom Company purchases a call option contract to purchase 510 shares of Crane Company stock on July 1, 2025. Crane is trading at $50 per share at that date. The cost of the call option contract was $100. At December 31, 2025 Crane stock is trading at $80 per share, and a market appraisal indicats that the time value of the option contract at that date is $70. Which of the following statements is true with regard to the option contract?
- Blossom's 2025 net income will increase by a total of $15300 as a result of holding the option.
- Blossom will report other comprehensive loss of $30 for 2025.
- The intrinsic value of the option contract is $15230 on December 31, 2025.
- Blossom will report the call option at its carrying value of $15370 in its December 31, 2025 balance sheet.
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