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On February 10, 2021, A&A Company purchased a call option for $2,200. The call option gives A&A the right to purchase 1,250 common shares of PC Inc. for $17. On May 17, 2021, A&A settles the call option in cash. On May 17, 2021, the common shares of PC Inc. are trading at $22 each. On May 17, 2021, the fair value of the call option purchased by A&A Company is $6.400. The entry to record the settlement of the option on the books of A&A Company is: O Derivatives - financial assets/liabilities 2.200 Cash 4,050 Gain or loss on derivatives 6.250 O Cash 6,250 Gain or loss on derivatives 4,050 Derivatives - financial assets/liabilities 2,200 O Cash 6.250 Gain or loss on derivatives 6,250

On February 10, 2021, A&A Company purchased a call option for $2,200. The call option gives A&A the right to purchase 1,250 common shares of PC Inc. for $17. On May 17, 2021, A&A settles the call option in cash. On May 17, 2021, the common shares of PC Inc. are trading at $22 each. On May 17, 2021, the fair value of the call option purchased by A&A Company is $6.400. The entry to record the settlement of the option on the books of A&A Company is: O Derivatives - financial assets/liabilities 2.200 Cash 4,050 Gain or loss on derivatives 6.250 O Cash 6,250 Gain or loss on derivatives 4,050 Derivatives - financial assets/liabilities 2,200 O Cash 6.250 Gain or loss on derivatives 6,250

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 7E
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On February 10, 2021, A&A Company purchased a call option for $2,200. The call option gives A&A the right to purchase 1,250 common shares of PC Inc. for $17. On May 17, 2021, A&A settles the call option in cash. On May 17, 2021, the common shares of PC Inc. are trading at $22 each. On May 17, 2021, the fair value of the call option purchased by A&A Company is $6.400. The entry to record the settlement of the option on the books of A&A Company is: Derivatives - financial assets/liabilities 2,200 Cash 4,050 Gain or loss on derivatives 6.250 Cash 6,250 Gain or loss on derivatives 4,050 Derivatives financial assets/liabilities 2,200 O Cash 6,250 Gain or loss on derivatives 6,250 O Cash 6,250 Derivatives - financial assets/liabilities 6,250
Transcribed Image Text:On February 10, 2021, A&A Company purchased a call option for $2,200. The call option gives A&A the right to purchase 1,250 common shares of PC Inc. for $17. On May 17, 2021, A&A settles the call option in cash. On May 17, 2021, the common shares of PC Inc. are trading at $22 each. On May 17, 2021, the fair value of the call option purchased by A&A Company is $6.400. The entry to record the settlement of the option on the books of A&A Company is: Derivatives - financial assets/liabilities 2,200 Cash 4,050 Gain or loss on derivatives 6.250 Cash 6,250 Gain or loss on derivatives 4,050 Derivatives financial assets/liabilities 2,200 O Cash 6,250 Gain or loss on derivatives 6,250 O Cash 6,250 Derivatives - financial assets/liabilities 6,250
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