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Warren Co. purchased a put option on Echo common shares

Warren Co. purchased a put option on Echo common shares on January 7, 2012, for $360. The

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Warren Co. purchased a put option on Echo common shares on January 7, 2012, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2012. The following data are available with respect to the put option.

InstructionsPrepare the journal entries for Warren Co. for the following dates.(a) January 7, 2012??Investment in put option on Echo shares.(b) March 31, 2012??Warren prepares financial statements.(c) June 30, 2012??Warren prepares financial statements.(d) July 6, 2012??Warren settles the put option on the Echoshares.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.

Transcribed Image Text:

Market Price of Echo Shares Time Value of Put Option Date March 31, 2012 June 30, 2012 July 6, 2012 $80 per share 82 per share 77 per share $200 90 25

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a January 7 2012 Put Option 360 Cash 360 b March 31 2012 Put Opt...View the full answer

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Intermediate Accounting

ISBN: 978-0470587287

14th Edition

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Question Posted: Oct 11, 2011 07:51 AM

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