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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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
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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