Question 3 On 6 July 2021, Falta Limited paid $300 to purchase a put option on Zebra Limited when the market price per ordinary shares was $120. The option gives Falta Limited to sell 500 shares at an exercise price of $120 and the option expires on 1 February 2022. Market price per share $ Time value of put Option $ Date 30 September 2021 31 December 2021 123 180 115 100 1 February 2022 112 30 Required: Prepare the journal entries for Falta for the following dates: (a) On 6 July 2021 to record the investment in the put option. (b) On 30 September 2021 when Falta Limited prepared the financial statements. (c) On 31 December 2021 when Falta Limited prepared the financial statements. (d) On 1 February 2022 when Falta Limited settled the call option.

Question 3 On 6 July 2021, Falta Limited paid $300 to purchase a put option on Zebra Limited when the market price per ordinary shares was $120. The option gives Falta Limited to sell 500 shares at an exercise price of $120 and the option expires on 1 February 2022. Market price per share $ Time value of put Option $ Date 30 September 2021 31 December 2021 123 180 115 100 1 February 2022 112 30 Required: Prepare the journal entries for Falta for the following dates: (a) On 6 July 2021 to record the investment in the put option. (b) On 30 September 2021 when Falta Limited prepared the financial statements. (c) On 31 December 2021 when Falta Limited prepared the financial statements. (d) On 1 February 2022 when Falta Limited settled the call option.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 22E

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1 16 Oct 2021: To assist with cashflow difficulties the company isued a prospectus inviting offers for 40000 options to acquire A ordinary share at a issue price of $2 per option, payable in full on application. Each option exercisable on 31 December 2021 allowed the holder to acquire one A ordinary share for $3. 31 Dec 2021: Offers wrer received for 30000 options and these were duly alloted. The holders of 25000 options exercised their options and 25000 A ordinary shares were alloted. The remaining time lapsed Required Prepare journal entries to record the following transaction in the records of Gold Ltd.(show all workings)
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