On July 4, 2020, StarGazer, Inc., purchased a call option for $ 5,400, giving it...
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On July 4, 2020, StarGazer, Inc., purchased a call option for $ 5,400, giving it the right to buy 3,000 shares of MarzBarz, Inc., at$30per share at any time during the next six months.On September 30, the option value was $11,200 which the company duly recorded in its books.On November 15, 2020, when the market price of the MarzBarz shares were $38, StarGazer exercised the call option and took delivery of the shares. The entry on the books to record the transaction on November 15 would be
a.
Investment In MarzBarz ...... DR $11,200; Derivatives - Financial Assets ...... CR $11,200
b.
Cash ...... DR $12,000; Derivatives - Financial Assets ...... CR $5,400; Gain On Derivatives ......CR $6,600
c.
Cash ...... DR $11,200; Gain On Derivatives ......CR $11,200
d.
Fair Value Investments In MarzBarz .... DR $90,000; Derivatives - Financial Assets .... CR $5,400; Cash ....CR $73,400;Gain On Derivatives ......CR $11,200
e.
Fair Value Investments In MarzBarz .... DR $114,000; Derivatives - Financial Assets .... CR $11,200; Cash ....CR $90,000;Gain On Derivatives ......CR $12,800
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