The option expires on January 31, 2020. The following data are available with respect to the call
Question:
Instructions
Prepare the journal entries for Outkast for the following dates.
a. Investment in call option on Counting Crows shares on August 15, 2019.
b. September 30, 2019-Outkast prepares financial statements.
c. December 31, 2019-Outkast prepares financial statements.
d. January 15, 2020-Outkast settles the call option on the Counting Crows shares.
Market Price of Counting Crows Shares Time Value of Call Option Date September 30, 2019 December 31, 2019 $48 per share 46 per share $180 65 30 January 15, 2020 47 per share
Step by Step Answer:
a August 15 2019 Call Option 360 Cash 360 b September 30 2019 Call Opt...View the full answer
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Related Video
A call option is a type of financial contract that gives the holder the right, but not the obligation, to buy an underlying asset (such as a stock, commodity, or currency) at a specified price (called the strike price) within a specified period of time. When an investor purchases a call option, they are essentially betting that the price of the underlying asset will rise above the strike price before the option\'s expiration date. If the price of the asset does rise above the strike price, the investor can exercise the option by buying the asset at the strike price and then selling it at the higher market price, thereby earning a profit. Call options are often used as a speculative investment strategy, as they allow investors to potentially profit from the upward movement of an asset without having to actually own the asset itself. They are also commonly used as a hedging tool to protect against potential losses in a portfolio.
Students also viewed these Managerial Accounting questions
-
The treasurer of Miller AG has read on the Internet that the price of Wade Inc. ordinary shares is about to take off. In order to profit from this potential development, Miller purchased a call...
-
The treasurer of Hing Wa Corp. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Hing Wa purchased a call option on...
-
Refer to P161, but assume that Hing Wa wrote (sold) the call option for a premium of $240 (instead of buying it). Assume that the market price of the shares and the value of the options is otherwise...
-
Which is the most effective means of motivating trainees for a training program? a. Pay extra for training time. b. Require the training only for newly hired workers. c. Explain why the training is...
-
In a manufacturing operation, three holes are drilled simultaneously in a work piece. Knowing that the holes are perpendicular to the surfaces of the work piece, replace the couples applied to the...
-
The adjusted trial balance of Karise Repairs on December 31, 2017, follows. Required 1. Prepare an income statement and a statement of owner's equity for the year 2017, and a classified balance sheet...
-
If you were in charge of taking Nikes focus on the customer to the next level, what would you do?
-
Nathan Matthews conducted a test of controls where the tolerable deviation rate was set at 6 percent and the expected population deviation rate was 3 percent. Using a sample size of 150, Matthews...
-
Perusahaan Otomobil Kedua Sendirian Berhad (English: Second Automobile Manufacturer Private Limited), usually abbreviated as Perodua /prdju/, is the second largest automobile manufacturer in Malaysia...
-
Laguna Bhd. is a company incorporated in Malaysia. The company involved in manufacturing, packaging and marketing of frozen food and beverages products for the local and international market. The...
-
Sarazan Ltd. issues a 4-year, 7.5% fixed-rate interest only, non-prepayable 1,000,000 note payable on December 31, 2019. It decides to change the interest rate from a fixed rate to variable rate and...
-
Choi Golf uses titanium in the production of its specialty drivers. Choi anticipates that it will need to purchase 200 ounces of titanium in October 2019, for clubs that will be shipped in the...
-
Who are the parties to a criminal case?
-
which approach method to assess mental health interventions / programs?
-
(a) What is the Black-Scholes partial differential equation (PDE) for the price f(t, S) at time t of a European derivative security on a stock with price S,? What does each term in the equation mean?...
-
1. During the year, the taxpayer estimates an additional of P80,000 uncollectible accounts. From the estimated uncollectible accounts last period, P40,000 is ascertained to be a receivable from a...
-
A. The capital structure of MAID Company is as follows: Long-term debt Common stock, RM1 par RM 400 million RM 50 million Contributed capital in excess of par Retained earnings RM 250 million Total...
-
Accounting Rate of Return Vanderhoort Company invested $9,960,000 in a new product line. The life cycle of the product is projected to be seven years with the following net income stream: $360,000,...
-
Project what human civilization would be like if our Sun were hidden in a dusty part of the galaxy such that no stars were ever visible to us at night.
-
A researcher reports a significant two-way between-subjects ANOVA, F(3, 40) = 2.96. State the decision to retain or reject the null hypothesis for this test.
-
Bedard Corporation reported net income of $300,000 in 2014 and had 200,000 common shares outstanding throughout the year. Also outstanding all year were 45,000 (written) options to purchase common...
-
Glavin Limited purchased 40,000 call options during the year. The options give the company the right to buy its own common shares for $9 each. The average market price during the year was $12 per...
-
Use the same information as in BE17-19 and assume that Glavin also wrote put options that allow the holder to sell Glavin's shares to Glavin at $13 per share. Calculate the incremental shares...
-
Use the statement from the Federal Reserve's May 3, 2023, FOMC meeting to answer the following questions. Here is a link to the statement:...
-
As a medium of exchange, how does the Invention of Money facilitate Exchange, division of labor, specialization, and productivity? Your answers need to be academic. Please explain, step-by-step, how...
-
Critically analyse the impact of China's trade surplus on global trade and determine the implications of this for countries such as South Africa.
Study smarter with the SolutionInn App