The treasurer of Carla Vista Corp. has read on the Internet that the stock price...
70.2K
Verified Solution
Link Copied!
Question
Accounting
The treasurer of Carla Vista Corp. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Carla Vista purchased a call option on Ewing common shares on July 7, 2020, for $450. The call option is for 240 shares (notional value), and the strike price is $85. The option expires on January 31, 2021. The following data are available with respect to the call option:
Fair Value
Market Price
Date
of Option
of Ewing Shares
Sept. 30,
2020
$1,810
$91 per share
Dec. 31,
2020
$960
$88 per share
Jan. 4,
2021
$1,550
$90 per share
Prepare the journal entry for Carla Vista for July 7, 2020: Invests in call option on Ewing shares. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
July 7, 2020
Prepare the journal entry for Carla Vista for September 30, 2020: Carla Vista prepares financial statements. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
September 30, 2020
Prepare the journal entry for Carla Vista for December 31, 2020: Carla Vista prepares financial statements. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2020
Prepare the journal entry for Carla Vista for January 4, 2021: Carla Vista settles the call option net on the Ewing shares (that is, without buying the shares). (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
January 4, 2021
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
