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On August 15, 2016, Martinez Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $450. The notional value
On August 15, 2016, Martinez Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $450. The notional value of the call option is 500 shares, and the option price is $50. The option expires on January 31, 2017. The following data are available with respect to the call option.
| Date | Market Price of Counting Crows Shares | Time Value of Call Option | ||
| September 30, 2016 | $60 per share | $225 | ||
| December 31, 2016 | $58 per share | 81 | ||
| January 15, 2017 | $59 per share | 38 |
Prepare the journal entries for Martinez for the following dates.
| (a) | Investment in call option on Counting Crows shares on August 15, 2016. | |
| (b) | September 30, 2016Martinez prepares financial statements. | |
| (c) | December 31, 2016Martinez prepares financial statements. | |
| (d) | January 15, 2017Martinez settles the call option on the Counting Crows shares. |
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