xercise 17-22 On January 2, 2014, Jones Company purchases a call option for $300on Merchant common stock. The call option gives Jones the option to buy1,000shares of Merchant at a strike price of $50per share. The market price of a Merchant share is $50on January 2, 2014 (the intrinsic value is therefore $0). On March 31, 2014, the market price for Merchant stock is $53per share, and the time value of the option is $200. (a)Prepare the journal entry to record the purchase of the call option on January 2, 2014.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 2, 2014

(b)Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2014.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Mar. 31, 2014
(To record the time value change.)
Mar. 31, 2014
(To record the change in intrinsic value.)

(c)What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2014?

Unrealized HoldingGainLoss

$

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