Question
The treasurer of Miller Co. has readnon the Internet that the stock price of Wade Inc. is about to take o . In order to
The treasurer of Miller Co. has readnon the Internet that the stock price of Wade Inc. is about to take o . In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2020, for $400. The call option is for 250shares (notional value), and the strike price is $50. (The market price of a share of Wade stock on that date is $50.) The option expires on January 31, 2021. The following data are available with respect to the call option. Date Market Price of Wade Shares Time Value of Call September 30, 2020 $55 per share $100 December 31, 2020 45 per share 40 January 4, 2021 47 per share 33 Instructions Prepare the journal entries for Miller Co. for the following dates. a. July 7, 2020Investment in call option on Wade shares. b. September 30, 2020Miller prepares financial statements. c. December 31, 2020Miller prepares financial statements. d. January 4, 2021Miller settles the call option on the Wade shares.
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