Exercise 17-27

On August 15, 2016, Pina Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $774. The notional value of the call option is 860 shares, and the option price is $86. 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		$103 per share		$387
December 31, 2016		$99 per share		140
January 15, 2017		$101 per share		65

Prepare the journal entries for Pina for the following dates.

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

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	Aug. 15, 2016	Call Option	774
		Cash		774
(b)	Sep. 30, 2016	Call Option	14620
		Unrealized Holding Gain or Loss - Income		14620
		(To record the change in intrinsic value.)
		Unrealized Holding Gain or Loss - Income	387
		Call Option		387
		(To record the time value change.)
(c)	Dec. 31, 2016	Unrealized Holding Gain or Loss - Income	3440
		Call Option		3440
		(To record the change in intrinsic value.)
		Unrealized Holding Gain or Loss - Income	247
		Call Option		247
		(To record the time value change.)
(d)	Jan. 15, 2017	Unrealized Holding Gain or Loss - Income	75
		Call Option		75
		(To record the time value change.)
		Cash
		Gain on Settlement of Call Option
		Call Option
		(To record settlement of call option.)