Question
On August 15, 2019, Skysong Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $684. The notional value
On August 15, 2019, Skysong Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $684. The notional value of the call option is 760 shares, and the option price is $76. The option expires on January 31, 2020. 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, 2019 | $91 per share | $342 | ||
December 31, 2019 | $87 per share | 124 | ||
January 15, 2020 | $89 per share | 57 |
Prepare the journal entries for Skysong for the following dates.
(a) | Investment in call option on Counting Crows shares on August 15, 2019. | |
(b) | September 30, 2019Skysong prepares financial statements. | |
(c) | December 31, 2019Skysong prepares financial statements. | |
(d) | January 15, 2020Skysong settles the call option on the Counting Crows shares. |
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
No. | Date | Account Titles and Explanation | Debit | Credit |
(a) | Aug. 15, 2019Sep. 30, 2019Dec. 31, 2019Jan. 15, 2020 | |||
(b) | Aug. 15, 2019Sep. 30, 2019Dec. 31, 2019Jan. 15, 2020 | |||
(To record the change in intrinsic value.) | ||||
(To record the time value change.) | ||||
(c) | Aug. 15, 2019Sep. 30, 2019Dec. 31, 2019Jan. 15, 2020 | |||
(To record the change in intrinsic value.) | ||||
(To record the time value change.) | ||||
(d) | Aug. 15, 2019Sep. 30, 2019Dec. 31, 2019Jan. 15, 2020 | |||
(To record the time value change.) | ||||
(To record settlement of call option.) |
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