On June 1, 2020, Krypton Industries [KI] purchased a call option for $ 2,400, giving...
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On June 1, 2020, Krypton Industries [KI] purchased a call option for $ 2,400, giving it the right to buy 2,000 shares of Kriminel Corporation for $ 20 per share. On June 30, 2020, similar options were being traded at $3,100. On August 18, 2020, when the option value was $ 12,000, Omega settles the option for cash. On August 18, 2020, KI settles the option for cash when the option value in the market is $12,000.
Prepare the journal entry in the books of KI, if required, to record this transaction.
a. No Journal Entry Required.
b. Derivatives - Financial Assets/Liabilities ........ DR $8,900; Cash ........ CR $8,900
c. Cash ........ DR $12,000; Derivatives - Financial Assets/Liabilities ........ CR $3,100; Gain/Loss On Derivatives ........ CR $8,900
d. Derivatives - Financial Assets/Liabilities ........ DR $700; Cash ........ CR $700 e. Cash ........ DR $12,000; Gain/Loss On Derivatives ........ CR $12,000
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