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The option expires on January 31, 2020. The following data are available with respect to the call

Question:

The option expires on January 31, 2020. The following data are available with respect to the call option.
Market Price of Counting Crows Shares Time Value of Call Option Date September 30, 2019 December 31, 2019 $48 per share

Instructions
Prepare the journal entries for Outkast for the following dates.
a. Investment in call option on Counting Crows shares on August 15, 2019.
b. September 30, 2019-Outkast prepares financial statements.
c. December 31, 2019-Outkast prepares financial statements.
d. January 15, 2020-Outkast settles the call option on the Counting Crows shares.

Transcribed Image Text:

Market Price of Counting Crows Shares Time Value of Call Option Date September 30, 2019 December 31, 2019 $48 per share 46 per share $180 65 30 January 15, 2020 47 per share

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a August 15 2019 Call Option 360 Cash 360 b September 30 2019 Call Opt...View the full answer


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Related Video

A call option is a type of financial contract that gives the holder the right, but not the obligation, to buy an underlying asset (such as a stock, commodity, or currency) at a specified price (called the strike price) within a specified period of time. When an investor purchases a call option, they are essentially betting that the price of the underlying asset will rise above the strike price before the option\'s expiration date. If the price of the asset does rise above the strike price, the investor can exercise the option by buying the asset at the strike price and then selling it at the higher market price, thereby earning a profit. Call options are often used as a speculative investment strategy, as they allow investors to potentially profit from the upward movement of an asset without having to actually own the asset itself. They are also commonly used as a hedging tool to protect against potential losses in a portfolio.

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