On April 1, 2022, the Bush Investment Traders Corporation [BIT] purchased a call option for $175 on Worldwide Hotels, Inc., [WWH] common shares. The call options gives [BIT] the option to buy 700 shares of [WWH] at an exercise/strike price of $27 per share any time during the next six months. The market price of [WWH] shares was $27 per share on April 1, 2022. On June 30, 2022, the fair value of the option was $10,000 which was incorporated in the books of [BIT]. On the following day when the market price for [WWH] stock was $38 per share, [BIT] exercised the option.

If BIT exercised the call option on July 1, 2022 and settled the contract without taking delivery of the WWH shares when the market price was $38 per share, the journal entry would be

a.

DR Cash .......... $7,700; DR Loss On Derivatives .......... $2,300; DR Investment In Derivatives .......... $10,000

b.

DR Cash .......... $26,600; DR Gain or Loss on Derivatives .......... $16,600; CR Investment In Derivatives ........... $10,000

c.

DR Gain or Loss on Derivatives ........... $175; CR Investment In Derivatives .......... $175

d.

DR Cash .......... $7,700; DR Loss on Derivatives .......... $2,125; CR Investment In Derivatives .......... $9,825

e.

None of the above answers.