Question

Johnstone Co. purchased a put option on Ewing ordinary shares on July 7, 2010, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of an ordinary share of Ewing on that date is $70.) The option expires on January 31, 2011. The following data are available with respect to the put option.


Instructions
Prepare the journal entries for Johnstone Co. for the following dates.
(a) July 7, 2010—Investment in put option on Ewing shares.
(b) September 30, 2010—Johnstone prepares financial statements.
(c) December 31, 2010—Johnstone prepares financial statements.
(d) January 31, 2011—Put optionexpires.


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  • CreatedJune 17, 2013
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