Use the following given information to answer Questions 1 - 2. On June 1, 2020, Krypton Industries
Question:
Use the following given information to answer Questions 1 - 2.On June 1, 2020,Krypton Industries[KI] purchased a call option for $ 2,400, giving it the right to buy 2,000 shares of Kriminel Corporation for $ 20 per share. On June 30, 2020, similar options were being traded at $3,100.On August 18, 2020, when the option value was $ 12,000, Omega settles the option for cash.
Prepare the journal entry, if required, to record the market effect on the call options on June 30.
a.
No Journal Entry Required.
b.
Derivatives - Financial Assets/Liabilities........DR$3,100;Cash........CR $3,100
c.
Cash........DR$3,100;Derivatives - Financial Assets/Liabilities........CR $3,100
d.
Derivatives - Financial Assets/Liabilities........DR$700;Cash........CR $700
e.
Derivatives - Financial Assets/Liabilities........DR$700;Gain/Loss On Derivatives........CR $700
On August 18, 2020,KIsettles the option for cash when the option value in the market is $12,000.Prepare the journal entry in the books ofKI, if required, to record this transaction.
a.
No Journal Entry Required.
b.
Derivatives - Financial Assets/Liabilities........DR$8,900;Cash........CR $8,900
c.
Cash........DR$12,000;Derivatives - Financial Assets/Liabilities........CR $3,100;Gain/Loss On Derivatives........CR$8,900
d.
Derivatives - Financial Assets/Liabilities........DR$700;Cash........CR $700
e.
Cash........DR$12,000;Gain/Loss On Derivatives........CR $12,000