(Call Option) On August 15, 2016, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. The option expires on January 31, 2017. The following data are available with respect to the call option. Date Market Price of Counting Crows Shares Time Value of Call Options September 30, 2016 $48 per share $180 December 31, 2016 46 per share 65 January 15, 2017 47 per share 30 InstructionsPrepare the journal entries for Outkast for the following dates.(a) Investment in call option on Counting Crows shares on August 15, 2016.(b) September 30, 2016—Outkast prepares financial statements.(c) December 31, 2016—Outkast prepares financial statements.(d) January 15, 2017—Outkast settles the call option on the Counting Crows shares.
(Call Option) On August 15, 2016, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. The option expires on January 31, 2017. The following data are available with respect to the call option.
Date | Market Price of Counting Crows Shares | Time Value of Call Options |
September 30, 2016 | $48 per share | $180 |
December 31, 2016 | 46 per share | 65 |
January 15, 2017 | 47 per share | 30 |
Instructions
Prepare the
(a) Investment in call option on Counting Crows shares on August 15, 2016.
(b) September 30, 2016—Outkast prepares financial statements.
(c) December 31, 2016—Outkast prepares financial statements.
(d) January 15, 2017—Outkast settles the call option on the Counting Crows shares.
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