On January 2, 2025, Splish Company purchases a call option for $290 on Merchant common stock. The call option gives Splish the option to buy 1,050 shares of Marchant at a strike price of $51 per share. The market price of a Merchant share is $51 on January 2, 2025 (the intrinsic value is therefore $0). On March 31, 2025, the market price for Marchant stock is $54 per share, and the time value of the option is $210. Your answer is correct. Prepare the journal entry to record the purchase of the call option on January 2, 2025. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts) Account Titles and Explanation Call Option Cash eTextbook and Media List of Accounts Debit Credit 290 290 Your answer is partially correct. Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Unrealized Holding Gain or Loss-Income Call Option (To record the time value change.) Call Option Unrealized Holding Gain or Loss-Income (To record the change in intrinsic value.) eTextbook and Media List of Accounts Debit 80 2080 Credit 80 2080 Your answer is partially correct. What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2025? Unrealized Holding Can 2000 eTextbook and Media
On January 2, 2025, Splish Company purchases a call option for $290 on Merchant common stock. The call option gives Splish the option to buy 1,050 shares of Marchant at a strike price of $51 per share. The market price of a Merchant share is $51 on January 2, 2025 (the intrinsic value is therefore $0). On March 31, 2025, the market price for Marchant stock is $54 per share, and the time value of the option is $210. Your answer is correct. Prepare the journal entry to record the purchase of the call option on January 2, 2025. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts) Account Titles and Explanation Call Option Cash eTextbook and Media List of Accounts Debit Credit 290 290 Your answer is partially correct. Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Unrealized Holding Gain or Loss-Income Call Option (To record the time value change.) Call Option Unrealized Holding Gain or Loss-Income (To record the change in intrinsic value.) eTextbook and Media List of Accounts Debit 80 2080 Credit 80 2080 Your answer is partially correct. What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2025? Unrealized Holding Can 2000 eTextbook and Media
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![On January 2, 2025, Splish Company purchases a call option for $290 on Merchant common stock. The call option gives Splish the
option to buy 1,050 shares of Marchant at a strike price of $51 per share. The market price of a Merchant share is $51 on January 2,
2025 (the intrinsic value is therefore $0). On March 31, 2025, the market price for Marchant stock is $54 per share, and the time
value of the option is $210.
Your answer is correct.
Prepare the journal entry to record the purchase of the call option on January 2, 2025. (List debit entry before credit entry. Credit
account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts)
Account Titles and Explanation
Call Option
Cash
eTextbook and Media
List of Accounts
Debit
Credit
290
290
Your answer is partially correct.
Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2025. (List all debit entries
before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts.)
Account Titles and Explanation
Unrealized Holding Gain or Loss-Income
Call Option
(To record the time value change.)
Call Option
Unrealized Holding Gain or Loss-Income
(To record the change in intrinsic value.)
eTextbook and Media
List of Accounts
Debit
80
2080
Credit
80
2080
Your answer is partially correct.
What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2025?
Unrealized Holding Can
2000
eTextbook and Media](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c719176-e144-498b-bb49-984d287b2cd4%2F52a1fecb-a995-4f20-92b4-c55c276c7b84%2Fb0o7bad_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 2, 2025, Splish Company purchases a call option for $290 on Merchant common stock. The call option gives Splish the
option to buy 1,050 shares of Marchant at a strike price of $51 per share. The market price of a Merchant share is $51 on January 2,
2025 (the intrinsic value is therefore $0). On March 31, 2025, the market price for Marchant stock is $54 per share, and the time
value of the option is $210.
Your answer is correct.
Prepare the journal entry to record the purchase of the call option on January 2, 2025. (List debit entry before credit entry. Credit
account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts)
Account Titles and Explanation
Call Option
Cash
eTextbook and Media
List of Accounts
Debit
Credit
290
290
Your answer is partially correct.
Prepare the journal entries to recognize the change in the fair value of the call option as of March 31, 2025. (List all debit entries
before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts.)
Account Titles and Explanation
Unrealized Holding Gain or Loss-Income
Call Option
(To record the time value change.)
Call Option
Unrealized Holding Gain or Loss-Income
(To record the change in intrinsic value.)
eTextbook and Media
List of Accounts
Debit
80
2080
Credit
80
2080
Your answer is partially correct.
What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2025?
Unrealized Holding Can
2000
eTextbook and Media
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