SmartiePants Corp., has reason to believe the shares of Groot Inc. is about to hit an all time low. After consulting their accounting team and a reputable analyst, they are forecasting a significant drop in market price of Groot Inc. shares in the upcoming months. To take advantage of this downfall, SmartiePants Corp. purchased a put option on January 1, 2023 for $700. The put option is for 500 shares of Groot Inc. at a strike price of $33 per share. The exercise period is between January 1, 2023 and June 30, 2023. Should the option be exercised by Groot Inc., it will be settled on a net cash basis. The journal entry for the investment in the put option had already been recorded on January 1, 2023. SmartiePants Corp prepares its annual financial statements ending March 31, 2023. 

What is the entry to be made on March 31, assuming the fair value of the option contract is $1,000 and the current market price of Groot Shares is $28 per share

Answer rating: 100% (QA)

To determine the entry to be made on March 31 2023 we need to calculate the fair value of the put op... View the full answer