Question
On June 1, 2017, Home Investor Funds, Ltd., [ HIF ] purchases a call option for $1,500, which gives HIF the right to buy 10,000
On June 1, 2017, Home Investor Funds, Ltd., [HIF] purchases a call option for $1,500, which gives HIF the right to buy 10,000 shares of Delta Plumbers, Inc., for $27 each until December 1, 2017. Delta shares are currently trading for $26. At June 30, 2017, the option contract could be traded in the market at $48,000. At December 1, 2017, with the shares being traded at $35 each, HIF exercised the option and took delivery of the shares of Delta.
Required: Record all necessary entry/entries related to this contract on the following dates:
a] June 1, 2017 when HIF acquired the call option.
b] June 30, 2017, when HIF closes its books of accounts.
c] December 1, 2017 assuming HIF exercised the call option and took delivery of the shares of Delta.
d] December 1, 2017, assuming HIF settles the call option for cash without taking delivery of the Delta shares.
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