The treasurer of Hing Wa Corp. has read on the Internet that the stock price of Ewing
Question:
Date Fair Value of Option Market Price of Ewing Shares
Sept. 30, 2014 ............... $1,340 ...................................... $76 per share
Dec. 31, 2014 ................. $ 825 ...................................... $73 per share
Jan. 4, 2015 .................. $1,200 ..................................... $75 per share
Instructions
Prepare the journal entries for Hing Wa for the following dates:
(a) July 7, 2014: Invests in call option on Ewing shares.
(b) September 30, 2014: Hing Wa prepares financial statements.
(c) December 31, 2014: Hing Wa prepares financial statements.
(d) January 4, 2015: Hing Wa settles the call option net on the Ewing shares (that is, without buying the shares).
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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Related Book For
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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