On November 3, 20X2.PRD Corporation acquired 2 JRS Company bonds ($1.000 face value) at a cost of 105. PRD classifies them as available-for-sale securities. On this same date, PRD decides to hedge against a possible decline in the value of the securities by purchasing at a cost of $100. an at-the-money put option to sell the 2 bonds at 105. The option expires on March 3, 20X3. The fair values of the investment and the options follow November 3, December 31, March 3, 2ex2 20x3 JRS Company bonds Per bond $1,050 $1,30 $1,625 Put option (2 bonds) Market value $ 100 $ 100 Intrinsic value 50 Time value $ $ -- 2ex2 $ 50 -- 40 60 $ lee Required: a. Prepare the entries required on November 3, 20X2, to record the purchase of the JRS bonds and the put options. (If no entry Is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet Record the purchase 2 JRS bonds at 105. Note: Enter debits before credits. Date General Journal Debit Credit Nov. 3. 20X2 Record entry Clear entry View general journal Required: a. Prepare the entries required on November 3. 20x2to record the purchase of the JRS bonds and the put options. (If no entry Is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet Record the purchase put options for 2 JRS bonds at 105 at a cost of $100. Note: Enter debits before credits. Date General Journal Debit Credit Nov. 3. 20X2 Record entry Clear entry View general journal b. Prepare the entries required on December 31, 20X2, to record the change in intrinsic value and time value of the options, as well as the revaluation of the available-for-sale securities. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet Record the decrease in fair value of hedged available-for-sale securities to current earnings, in accordance with ASC 815. Note: Enter debits before credits. General Journal Debit Credit Date Dec 31, 20X2 Record entry Clear entry View general journal b. Prepare the entries required on December 31, 20X2, to record the change in intrinsic value and time value of the options, as well as the revaluation of the available-for-sale securities. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet Record the increase in intrinsic value of put options to current earnings. Note: Enter debits before credits Date General Journal Debit Credit Mar. 3. 20X3 Record entry Clear entry View general journal C. Prepare the entries required on March 3. 20X3. to record the exercise of the put option and the sale of the securities at that date. (If no entry is required for a transaction/event, select "No journal entry required" In the first account fleld.) View transaction list Journal entry worksheet 4 > Record the decrease in fair value of hedged available-for-sale securities to current earnings, in accordance with ASC 815. Note: Enter debits before credits. Date General Journal Debit Credit Mar. 3. 20X3 Record entry Clear entry View general journal C. Prepare the entries required on March 3. 20X3. to record the exercise of the put option and the sale of the securities at that date. (If no entry is required for a transaction/event, select "No journal entry required" In the flrst account fleld.) View transaction list Journal entry worksheet Record the decrease in the time value of the options. The options have now expired. Note: Enter debits before credits. Date General Journal Debit Credit Mar. 3. 20X3 Record entry Clear entry View general journal c. Prepare the entries required on March 3, 20X3. to record the exercise of the put option and the sale of the securities at that date. (if no entry is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet
