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On August 1, 2020, Grouper Ltd. purchased a call option from DDR Investments Corporation. The option gave Grouper the right to buy 20,000 shares in
On August 1, 2020, Grouper Ltd. purchased a call option from DDR Investments Corporation. The option gave Grouper the right to buy 20,000 shares in a third company, MGL Ltd. at a price of $23.25 per share. On the day Grouper purchased the option, MGL shares were trading at $23.25 each. Grouper paid $900 for the options. On August 31, 2020, the MGL shares were trading at $25.00 each, and the options for MGL shares were trading at $35,500. On September 15, Grouper settled the options in cash when the MGL shares were trading at $26.25, and the options were trading at $60,000. Prepare the journal entries to record the above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Aug. 1 Aug. 31 Sept. 15 (To record the acquisition of the option.) (To record the change in value of the option.) Date Account Titles and Explanation Debit Credit (To record the acquisition of the option.) (To record the change in value of the option.) (To record the change in value of the option.) (To record the settlement of the option.)
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