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Problem 3 Mega Company believes the price of oil will increase in the coming months. Therefore, it decides to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil. On November 30, 2016, Mega purchase call options for 10,000 barrels of oil at P30 per barrel at a premium of P2 per barrel, with a March 1, 2017, call date. The following is the pricing information for the term of the call: Spot Price Future Price (for March 1, 2017) Date November 30, 2016 December 31, 2016 March 1, 2017 33 P30 31 P31 32 The information for the change in the fair value of the options follows: Date Time Value Intrinsic Value Total Value November 30, 2016 P20,000 P-O-P20,000 December 31, 2016 6,000 10,000 16,000 March 1, 2017 30,000 30,000 On March 1, 2017, Mega sells the options at their value on that date and acquires 10,000 barrels of oil at the spot price. On June 1, 2017. Mega sells the oil for P34 per barrel. Required a. Prepare the journal entry required on November 30, 2016 to record the purchase of the call options. b. Prepare the adjusting journal entry required on December 31, 2016 to record the change in time and intrinsic value of the call options. c. Prepare the entries required on March 1, 2017 to record the expiration of the time value of the options, the sale of the options, and the purchase of the 10,000 barrels of oil. d. Prepare the entries required on June 1, 2017 to record the sale of the oil and any other entries required as a result of the option