On June 1, 2020, Krypton Industries [KI] purchased a call option for $ 2,400, giving it the right to buy 2,000 shares of Kriminel Corporation for $ 20 per share. On June 30, 2020, similar options were being traded at $3,100. On August 18, 2020, when the option value was $ 12,000, Omega settles the option for cash.

1. Prepare the journal entry, if required, to record the market effect on the call options on June 30.

a). No Journal Entry Required.

b). Derivatives - Financial Assets/Liabilities ........  DR $3,100; Cash ........    CR $3,100

c). Cash ........  DR $3,100; Derivatives - Financial Assets/Liabilities ........    CR $3,100

d). Derivatives - Financial Assets/Liabilities ........  DR $700; Cash ........    CR $700

e). Derivatives - Financial Assets/Liabilities ........   DR $700; Gain/Loss On Derivatives ........   CR $700

Answer rating: 100% (QA)

The correct answer is e Derivatives Financial AssetsLiabilities DR ... View the full answer