On October 1, 2021, Harrison Ltd. purchased a call option from Charles Schwab Corporation. The option gave Harrison the right to buy 10,000 shares in Starr Ltd., at a price of $ 50 per share. Or the day Harrison purchased the option, Starr shares were trading at $ 50 each. Harrison paid s 2,000 for the options. When Harrison Ltd. prepared its monthly financial statements on October 31, 2021, the Starr shares were trading at $53.50 each, and the options for Starr shares were trading at $36,000.On November 15, Harrison settled the options in cash when the Starr shares were trading at $56 and the options were trading at $ 60,000.

Instructions

A) Prepare the journal entries to record the transactions described above.

B) Calculate the intrinsic and time value of the option on October 31, 2021.

C) Prepare the November 15 journal entry, now assuming Harrison exercised its right to acquire the shares in Starr.