Exercise 17-27

On August 15, 2016, Splish Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $504. The notional value of the call option is 560 shares, 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 $67 per share $252 December 31, 2016 $64 per share 91 January 15, 2017 $66 per share 42

Prepare the journal entries for Splish for the following dates.

(a) Investment in call option on Counting Crows shares on August 15, 2016. (b) September 30, 2016Splish prepares financial statements. (c) December 31, 2016Splish prepares financial statements. (d) January 15, 2017Splish 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 Sep. 30, 2016 Dec. 31, 2016 Jan. 15, 2017 (b) Aug. 15, 2016 Sep. 30, 2016 Dec. 31, 2016 Jan. 15, 2017 (To record the change in intrinsic value.) (To record the time value change.) (c) Aug. 15, 2016 Sep. 30, 2016 Dec. 31, 2016 Jan. 15, 2017 (To record the change in intrinsic value.) (To record the time value change.) (d) Aug. 15, 2016 Sep. 30, 2016 Dec. 31, 2016 Jan. 15, 2017 (To record the time value change.) (To record settlement of call option.)