Exercise 17-27

On August 15, 2016, Cullumber Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $504. The notional value of the call option is560shares, and the option price is $56. The option expires on January 31, 2017. The following data are available with respect to the call option.

Date

Market Price of Counting

Crows Shares

Time Value of Call

Option

September 30, 2016$67per share$252December 31, 2016$64per share91January 15, 2017$66per share42

Prepare the journal entries for Cullumber for the following dates.

(a)Investment in call option on Counting Crows shares on August 15, 2016.(b)September 30, 2016Cullumber prepares financial statements.(c)December 31, 2016Cullumber prepares financial statements.(d)January 15, 2017Cullumber settles the call option on the Counting Crows shares.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)