Required: Prepare the journal entries required on the books of Sunco Limited on each of the following dates: May 1, 2020 May 31, 2020 June 16, 2020
On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third company, Galaxy Company. Sunco settled the options in cash on June 16, 2020. Following are additional details pertaining to the option:
|
Number of shares that can be purchased with the call option |
7,400 |
|
Call option exercise price per share |
$ 10.03 |
|
Market price per share of Galaxy Company on May 1, 2020 |
$ 10.03 |
|
Price paid by Sunco to purchase the option |
$ 1,800 |
|
Market price per share of Galaxy Company on May 31, 2020 |
$ 11.24 |
|
Fair value of call option on May 31, 2020 |
$ 9,200 |
|
Market price per share of Galaxy Company on June 16, 2020 |
$ 11.29 |
|
Fair value of call option on June 16, 2020 |
$ 8,800 |
Sunco has a year end of May 31.
|
Required: |
|
Prepare the dates: |
|
May 1, 2020 |
|
May 31, 2020 |
|
June 16, 2020 |
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