On June 1, 2007, Prens Funds, Ltd. purchases a call option for $3,000, which gives...
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On June 1, 2007, Prens Funds, Ltd. purchases a call option for $3,000, which gives Prens Funds the right to buy 20,000 shares of Delta Plumbers, Inc., for $54 each until December 1, 2007. Delta shares are currently trading for $52. At June 30, 2007, the option contract could be traded in the market at $96,000. At December 1, 2007, with the shares being traded at $70 each, Prens Funds exercised the option and took delivery of the shares of Delta.
Required: Record all necessary entry/entries related to this contract on the following dates:
a] June 1, 2007 when Prens Funds acquired the call option.
b] June 30, 2007, when Prens Funds closes its books of accounts.
c] December 1, 2007 assuming Prens Funds exercised the call option and took delivery of the shares of Delta.
d] December 1, 2007, assuming Prens Funds settles the call option for cash without taking delivery of the Delta shares.
NOTE: If no entry is needed, write "No entry necessary".
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