On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike price of $130 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $70. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $50 (assume cash settlement). Prices of FVA stock during the option period are provided below. June 15 $135 Price of FVA stock: April 1 $130 June 30 $125 What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option contract? (Loss amounts should be indicated with a minus sign.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike
price of $130 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter
the contract at signing) was $70. Wilson settled the option on June 15, when a market appraisal estimated the time value
of the option to be $50 (assume cash settlement). Prices of FVA stock during the option period are provided below.
June 15
June 30
$125
$135
Price of FVA stock:
April 1
$130
What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option
contract? (Loss amounts should be indicated with a minus sign.)
Transcribed Image Text:On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike price of $130 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $70. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $50 (assume cash settlement). Prices of FVA stock during the option period are provided below. June 15 June 30 $125 $135 Price of FVA stock: April 1 $130 What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option contract? (Loss amounts should be indicated with a minus sign.)
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