Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On April 1, 2020, Gamma Corp. purchases a call option for $ 500, which gives Gamma the right to buy 1,000 shares of Delta Inc.

On April 1, 2020, Gamma Corp. purchases a call option for $ 500, which gives Gamma the right to buy 1,000 shares of Delta Inc. for $ 30 each until December 1, 2020. Delta Inc. shares are currently trading for $ 30. At June 30, 2020, the options are trading at $ 4,000 and Gamma prepare financial statements on This June 30, 2020. At December 1, 2020, the options expire with no value.

What entry (if any) Gamma will prepare to record this option on June 30, 2020

a) DerivativesFinancial Assets/Liabilities............................................... 4,000

Gain or Loss on Derivatives.......................................................... 4,000

b.) DerivativesFinancial Assets/Liabilities............................................... 3,500

Gain or Loss on Derivatives.......................................................... 3,500

c.) Other Comprehensive Loss..................................................................... 3,500

DerivativesFinancial Assets/Liabilities..................................... 3,500

d.) no entry.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Effectiveness Analysis Methods And Applications

Authors: Henry M. Levin, Patrick J. McEwan

2nd Edition

0761919333, 978-0761919339

More Books

Students also viewed these Accounting questions

Question

2.7 Identify how privacy legislation impacts employees.

Answered: 1 week ago