Question
On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third
On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third company, Galaxy Company. Sunco settled the options in cash on June 16, 2020. Following are additional details pertaining to the option:
| Number of shares that can be purchased with the call option | 7,400 |
| Call option exercise price per share | $ 10.03 |
| Market price per share of Galaxy Company on May 1, 2020 | $ 10.03 |
| Price paid by Sunco to purchase the option | $ 1,800 |
| Market price per share of Galaxy Company on May 31, 2020 | $ 11.24 |
| Fair value of call option on May 31, 2020 | $ 9,200 |
| Market price per share of Galaxy Company on June 16, 2020 | $ 11.29 |
| Fair value of call option on June 16, 2020 | $ 8,800 |
Sunco has a year end of May 31.
| Required: |
| Prepare the journal entries required on the books of Sunco Limited on each of the following dates: |
| May 1, 2020 |
| May 31, 2020 |
| June 16, 2020 |
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GCP Auditing Methods And Experiences
Authors: Editio
1st Edition
3871932841, 978-3871932847
