Brondon Corp. purchased a put option on Mykia common shares on July 7, 2014, for $480. The

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Brondon Corp. purchased a put option on Mykia common shares on July 7, 2014, for $480. The put option is for 350 shares, and the strike price is $50. The option expires on January 31, 2015. The following data are available with respect to the put option:
Date Fair Value of Option Market Price of Mykia Shares
Sept. 30, 2014 ................ $250 ......................................... $56 per share
Dec. 31, 2014 ................. $100 ........................................ $58 per share
Jan. 31, 2015 .................... $ 0 ........................................ $62 per share
Instructions
Prepare the journal entries for Brondon Corp. for the following dates:
(a) July 7, 2014: Invests in put option on Mykia shares.
(b) September 30, 2014: Brondon prepares financial statements.
(c) December 31, 2014: Brondon prepares financial statements.
(d) January 31, 2015: Put option expires.
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.
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Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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