Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On January 2, 2020, Metlock Company purchases a call option for $280 on Merchant common stock. The call option gives Metlock the option to buy
On January 2, 2020, Metlock Company purchases a call option for $280 on Merchant common stock. The call option gives Metlock the option to buy 900 shares of Merchant at a strike price of $47 per share. The market price of a Merchant share is $47 on January 2, 2020 (the intrinsic value is therefore $0). On March 31, 2020, the market price for Merchant stock is $50 per share, and the time value of the option is $200. Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2020. (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 Ofor the amounts.) Debit Credit Date Account Titles and Explanation Mar. 31. 2020 (To record the time value change.) Mar. 31. 2020 (To record the change in intrinsic value.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started