The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc.

Question:

The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2025, for $240. The call option is for 200 shares (notional value), and the strike price is $70. (The market price of a share of Wade stock on that date is $70.) The option expires on January 31, 2026. The following data are available with respect to the call option.image



Instructions


Prepare the journal entries for Miller Co. for the following dates.


a. July 7, 2025—Investment in call option on Wade shares.


b. September 30, 2025—Miller prepares financial statements.


c. December 31, 2025—Miller prepares financial statements.


d. January 4, 2026—Miller settles the call option on the Wade shares.

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Intermediate Accounting

ISBN: 9781119790976

18th Edition

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

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