Question
Blossom Inc, purchases a call option contract on January 2, 2023, from Baird Investment Corp. The option gives Blossom the right to purchase 3,270 Laredo
Blossom Inc, purchases a call option contract on January 2, 2023, from Baird Investment Corp. The option gives Blossom the right to purchase 3,270 Laredo Corp. shares (the underlying) at $220 per share (the exercise/strike price), and it expires April 30, 2023. For the right to buy the shares at this fixed price, Blossom pays a premium of $880. This is a financial derivative because the underlying is a nancial asset the Laredo shares. At the time of the transaction, Laredo shares are trading at $220. If the price of Laredo shares increases above $220, Blossom can exercise the option and purchase the shares for $220 per share. Alternatively. Blossom may sell the option to someone else. Prepare the related journal entry for Blossom at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry. If no entry is required, select "No Entry" fol the account titles and enter O for the amounts.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started