Exercise Chapter 4 Financial Instruments: Derivatives & Hedging QUESTION In October 2018, TLT Bhd decided to invest its idle cash in the shares of SGS Bhd. Therefore, on 1 November 2018, TLT purchased 200,000 shares of SGS at RM2.50 per share. The investment was measured at fair value through profit or loss. On the same date, TLT purchased put option on 200,000 shares of SGS at a premium of RM0.06 per share. The put option had an exercise price of RM2.50. The expiry date was 30 April 2019. The prices of the shares of STS and the put option were as follows: Date Price per unit of share Time value per unit of put option 30 November 2018 RM2.35 RM0.04 31 December 2018 RM2.40 RM0.03 REQUIRED: Prepare the journal entries on 1 November 2018, 30 November 2018 and 31 December 2018 with regard to the investment in shares of SGS and the purchase of put option in accordance with the fair value method.
Exercise Chapter 4 Financial Instruments: Derivatives & Hedging QUESTION In October 2018, TLT Bhd decided to invest its idle cash in the shares of SGS Bhd. Therefore, on 1 November 2018, TLT purchased 200,000 shares of SGS at RM2.50 per share. The investment was measured at fair value through profit or loss. On the same date, TLT purchased put option on 200,000 shares of SGS at a premium of RM0.06 per share. The put option had an exercise price of RM2.50. The expiry date was 30 April 2019. The prices of the shares of STS and the put option were as follows: Date Price per unit of share Time value per unit of put option 30 November 2018 RM2.35 RM0.04 31 December 2018 RM2.40 RM0.03 REQUIRED: Prepare the journal entries on 1 November 2018, 30 November 2018 and 31 December 2018 with regard to the investment in shares of SGS and the purchase of put option in accordance with the fair value method.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Exercise Chapter 4 Financial Instruments: Derivatives & Hedging
QUESTION
In October 2018, TLT Bhd decided to invest its idle cash in the shares of SGS Bhd. Therefore, on 1 November 2018, TLT purchased 200,000 shares of SGS at RM2.50 per share. The investment was measured at fair value through profit or loss. On the same date, TLT purchased put option on 200,000 shares of SGS at a premium of RM0.06 per share. The put option had an exercise price of RM2.50. The expiry date was 30 April 2019.
The prices of the shares of STS and the put option were as follows:
|
Date |
|
Price per unit of share |
|
Time value per unit of put option |
|
30 November 2018 |
|
RM2.35 |
|
RM0.04 |
|
31 December 2018 |
|
RM2.40 |
|
RM0.03 |
REQUIRED:
Prepare the
Transcribed Image Text:ВKAR 3033
Exercise Chapter 4 Financial Instruments: Derivatives & Hedging
QUESTION
In October 2018, TLT Bhd decided to invest its idle cash in the shares of SGS Bhd. Therefore,
on 1 November 2018, TLT purchased 200,000 shares of SGS at RM2.50 per share. The
investment was measured at fair value through profit or loss. On the same date, TLT
purchased put option on 200,000 shares of SGS at a premium of RM0.06 per share. The put
option had an exercise price of RM2.50. The expiry date was 30 April 2019.
The prices of the shares of STS and the put option were as follows:
Price per unit
Time value
Date
of share
per unit of put option
30 November 2018
RM2.35
RM0.04
31 December 2018
RM2.40
RM0.03
REQUIRED:
Prepare the journal entries on 1 November 2018, 30 November 2018 and 31 December
2018 with regard to the investment in shares of SGS and the purchase of put option in
accordance with the fair value method.
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