Question

Warren Co. purchased a put option on Echo ordinary shares on January 7, 2010, 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, 2010. The following data are avail-able with respect to the put option.


Instructions
Prepare the journal entries for Warren Co. for the following dates.
(a) January 7, 2010—Investment in put option on Echo shares.
(b) March 31, 2010—Warren prepares financial statements.
(c) June 30, 2010—Warren prepares financial statements.
(d) July 6, 2010—Warren settles the put option on the Echoshares.


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  • CreatedJune 17, 2013
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