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Call Option on August 15, 2010. Outkast Co. invested idle

Call Option on August 15, 2010. Outkast Co. invested idle cash by purchasing a call option on

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Call Option on August 15, 2010. Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. (Market price of an Outkast share is $40.) The option expires on January 31, 2011. The following data are available with respect to the call option. Prepare the journal entries for Outkast for the following dates.

(a) Investment in call option on Counting Crows shares on August 15, 2010.

(b) September 30, 2010?Outkast prepares financial statements.

(d) January 15, 2011?Outkast settles the call option on the Counting Crows shares.

Transcribed Image Text:

Time Value of Call Market Price of Counting Crows Shares $48 per share Date September 30, 2010 December 31, 2010 January 15, 2011 Option $180 65 65 30 per share $47 per share

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a b c Call Option Cash August 15 2010 September 30 2010 Unrealiz...View the full answer

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Intermediate Accounting

ISBN: 978-0470423684

13th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

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Question Posted: Feb 18, 2011 12:26 AM

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