Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information On August 1, 2022, a company purchased a call option on shares of NMV stock for speculative purposes. The contract was for 100

image text in transcribed
image text in transcribed
Required information On August 1, 2022, a company purchased a call option on shares of NMV stock for speculative purposes. The contract was for 100 shares at a strike price of $105 per share, with an expiration date of October 31, 2022. The option contract premium was $50. On September 30, a market appraisal estimated time value of the option to be $34. The company settled the option contract on October 5 (assume cash settlement), on which date time value was estimated to be $30. Prices of NMV stock during the option period are provided below. Augusti $105 september 30 $121 October $129 Price per share of stock! Use the information above to answer the questions below. Compute time value of the option on the date of purchase (August 1). Time value of option on purchase date (August 1): Required information On August 1, 2022, a company purchased a call option on shares of NMV stock for speculative purposes. The contract was for 100 shares at a strike price of $105 per share, with an expiration date of October 31, 2022. The option contract premium was $50. On September 30, a market appraisal estimated time value of the option to be $34. The company settled the option contract on October 5 (assume cash settlement), on which date time value was estimated to be $30. Prices of NMV stock during the option period are provided below. August $105 September 30 $121 Price per share of stock! October 5 $129 Use the information above to answer the questions below. The journal entry for settiement of the option on October 5 will include a; Click to select) debit to Cash for $2,430 credit to Call Option for $2,400 debit to Cash for $2,370 credit to Call Option for $2.430

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Business Perspective

Authors: Jefferson Williams, Roger Hermanson, James Don Edwards

10th Edition

1930789793, 978-1930789791

More Books

Students also viewed these Accounting questions

Question

Identify some of the global differences when negotiating.

Answered: 1 week ago

Question

Describe the team performance model.

Answered: 1 week ago