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On January 2, 2025, Sweet Company purchases a call option for $270 on Merchant common stock. The call option gives Sweet the option to
On January 2, 2025, Sweet Company purchases a call option for $270 on Merchant common stock. The call option gives Sweet the option to buy 1,010 shares of Merchant at a strike price of $53 per share. The market price of a Merchant share is $53 on January 2, 2025 (the intrinsic value is therefore $0). On March 31, 2025, the market price for Merchant stock is $56 per share, and the time value of the option is $180. (a) Prepare the journal entry to record the purchase of the call option on January 2, 2025. (List debit entry before credit entry. 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 O for the amounts.) Account Titles and Explanation Debit Credit
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