Johnstone Co. entered into a call option on Ewing common shares on July 7, 2019. The call option gives the right to purchase 2000 shares at a strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2020. The following data are available with respect to the put option.

Date Market Price of Ewing Shares Time value of call option

July 7, 2019 $70 per share $200

September 30, 2019 $77 per share $120

December 31, 2019 75 per share $70

January 31, 2020 78 per share $30

Instructions

Prepare the journal entries for Johnstone Co. for the following dates.

(a) July 7, 2019Investment in call option on Ewing shares.

(b) September 30, 2019Johnstone prepares financial statements.

(c) December 31, 2019Johnstone prepares financial statements.

(d) January 31, 2020call option expires.