On August 15, 2014 XYZ Inc. made an investment by purchasing a call option on...
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Accounting
On August 15, 2014 XYZ Inc. made an investment by purchasing a call option on ABC Inc common shares for $360. The notional value of the call option is 400 shares and the option price is $40 (Market price of ABC is $40). The option expires on 1/31/15. The following data applies with respect to the call option.
Date Market Price of ABC Shares Time Value of Call Option
9/30/14 $48/share $180
12/31/14 $46/share $65
1/15/15 $47/share $30
Prepare journal entries for XYZ for the following dates:
1. 8/15/14 investment in options of ABC
2. 9/30/14 XYZ prepares financial statements
3. 12/31/14 XYZ prepares financial statement
4. 1/15/15 XYZ settles the call option on the ABC shares
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