Question
On August 1, 2020,BlossomLtd. purchased a call option from DDR Investments Corporation. The option gaveBlossomthe right to buy18,000shares in a third company, MGL Ltd., at
On August 1, 2020,BlossomLtd. purchased a call option from DDR Investments Corporation. The option gaveBlossomthe right to buy18,000shares in a third company, MGL Ltd., at a price of $22.25per share. On the dayBlossompurchased the option, MGL shares were trading at $22.25each.Blossompaid $700for the options. On August 31, 2020, the MGL shares were trading at $24.75each, and the options for MGL shares were trading at $45,500. On September 15,Blossomsettled the options in cash when the MGL shares were trading at $25.75, and the options were trading at $63,000.
A. Prepare the journal entries to record the above transactions.
B. Prepare the September 15 journal entryassumingBlossomaccepted instead the shares in MGL.
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Intermediate Accounting Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
12th Canadian edition
119-49633-5, 1119496497, 1119496330, 978-1119496496
