Chapter 2, Problem 2.15E

In the table below, choose the financial instrument to list on the left side that best explains the example on the right side. Types of financial instrument to select from: financial asset, financial liability, equity, compound instrument, basic option, swap, forward, future, warrant, put option, or call option.    Type of financial instrument  Example    A company contracts with an investment bank to pay the bank prime rate + 1% interest on $25 million of debt in exchange for receiving 5% from the bank.    Company Abacus issues $10 million debentures with warrants to purchase shares for $10/share within 8 years.    A company contracts to sell 100 barrels of oil at $110/barrel in March on the Chicago Mercantile Exchange.    Note payable    A company purchases the right but not the obligation to purchase 5,000 shares in another company at $15 each over a 12-year period.    Company X contracts to buy 1,000 oz of silver at $40/oz on March 15,…

General Accounting

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General Accounting

On August 15, 2026, Tropical Breeze Company issued 80,000 options on the shares of Sunshine Corporation. Each option gives the option holder the right to buy one share of Sunshine Corporation at $70 per share until March 16, 2027. Tropical Breeze received $800,000 for issuing these options. At the company's year-end of December 31, 2026, the options contracts traded on the Montreal Exchange at $9.50 per contract. On March 16, 2027, Sunshine Corporation shares closed at $63 per share, so none of the options was exercised.    Required  Record the journal entries related to these call options.

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