Yates Co. Purchased a put option on Dixon common shares on January 7, 2014, for $270. The put option is for 300 shares, and the strike price is $64. The option expires on July 31, 2014. The following data are available with respect to the put option: Date Market Price of Dixon shares Time Value of Put Option March 31, 2014 $60 per share $150 June 30, 2014 $62 per share 68 July 6, 2014 $58 per share 20

Yates Co. Purchased a put option on Dixon common shares on January 7, 2014, for $270. The put option is for 300 shares, and the strike price is $64. The option expires on July 31, 2014. The following data are available with respect to the put option: Date Market Price of Dixon shares Time Value of Put Option March 31, 2014 $60 per share $150 June 30, 2014 $62 per share 68 July 6, 2014 $58 per share 20

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 16E

See similar textbooks

Similar questions

On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
Sun Corporation issues 500 shares of 8 par common stock for a patent. The stock is currently selling for 37 per share on the open market, and no significant impact on the market price is expected by the issuance of the additional shares. Prepare the journal entry to record this transaction.
Yates Co. Purchased a put option on Dixon common shares on January 7, 2014, for $270. The put option is for 300 shares, and the strike price is $64. The option expires on July 31, 2014. The following data are available with respect to the put option: Date Market Price of Dixon shares Time Value of Put Option March 31, 2014 $60 per share $150 June 30, 2014 $62 per share 68 July 6, 2014 $58 per share 20 Required: Prepare the journal entries for Yates Co. for the following dates: January 7, 2014-Investment in put option on Dixon shares. March 31, 2014-Yates prepares financial statements. June 30, 2014-Yates prepares financial statements. July 6, 2014- Yates settles the put option on the Dixon shares.
Ivanhoe Corp. purchased a put option on Mykia common shares on July 7, 2020, for $468. The put option is for 350 shares, and the strike price is $50. The option expires on January 31, 2021. The following data are available with respect to the put option: Fair Value Market Price Date of Option of Mykia Shares Sept. 30, 2020 $230 $58 per share Dec. 31, 2020 $97 $60 per share Jan. 31, 2021 $0 $64 per share Prepare the journal entries for Miller Co. for the following dates. (a) July 7, 2020—Investment in call option on Wade shares. (b) September 30, 2020—Miller prepares financial statements. (c) December 31, 2020—Miller prepares financial statements. (d) January 4, 2021—Miller settles the call option on the Wade shares
Warren Co. purchased a put option on Echo common shares on January 7, 2020, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2020. The following data are available with respect to the put option. Date Market Price of Echo Shares Time Value of Put Option March 31, 2020 $80 per share $200 June 30, 2020 82 per share 90 July 6, 2020 77 per share 25 Instructions Prepare the journal entries for Warren Co. for the following dates. a. January 7, 2020—Investment in put option on Echo shares. b. March 31, 2020—Warren prepares financial statements. c. June 30, 2020—Warren prepares financial statements. d. July 6, 2020—Warren settles the put option on the Echo shares.
On January 1, 2022, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $200 per share Expiration date: May 31, 2022 Total cost of the option contract: $80 Seller of the option contract: First Investment Bank On January 1, 2022, ICM stock was trading at $200 per share.The following additional information is known: On March 31, 2022, the price of ICM stock was $220 per share. A market appraisal indicated that the time value of the option contract was $60. On May 10, 2022, the price of ICM stock was $185 per share. A market appraisal indicated that the time value of the option contract was $50. On this date, Rosewood settled the option contract. What is the dollar value of put option that Rosewood Corp. would have included in its March 2022 quarterly financial statements?
Johnstone Co. purchased a put option on Ewing common shares on July 7, 2020, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2021. The following data are available with respect to the put option. Date Market Price of Ewing Shares Time Value of Put Option September 30, 2020 $77 per share $125 December 31, 2020 75 per share 50 January 31, 2021 78 per share 0 Instructions Prepare the journal entries for Johnstone Co. for the following dates. a. July 7, 2020—Investment in put option on Ewing shares. b. September 30, 2020—Johnstone prepares financial statements. c. December 31, 2020—Johnstone prepares financial statements. d. January 31, 2021—Put option expires.
On January 1, 2016, Dan Corporation granted an employee an option to purchase 3,000 shares of Dan’s P5 par value ordinary share at P20 each. The option became exercisable on December 31, 2018. The option was exercised on January 10, 2019.The market prices of Dan’s share capital were as follows:January 1, 2016 – P30; December 31, 2016 – P50; January 10, 2019 – P45. The company cannot reliably determine the fair value of the share option, so it decided to use the intrinsic value method. For the year 2016, how much should Dan recognize as compensation expense?
On August 15, 2019, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. The option expires on January 31, 2020. The following data are available with respect to the call option. Date Market Price of Counting Crows Shares Time Value of Call Option September 30, 2019 $48 per share $180 December 31, 2019 46 per share 65 January 15, 2020 47 per share 30 Instructions Prepare the journal entries for Outkast for the following dates. a. Investment in call option on Counting Crows shares on August 15, 2019. b. September 30, 2019—Outkast prepares financial statements. c. December 31, 2019—Outkast prepares financial statements. d. January 15, 2020—Outkast settles the call option on the Counting Crows shares.
On January 2, 2020, Ayayai Company purchases a call option for $310 on Merchant common stock. The call option gives Ayayai the option to buy 1,090 shares of Merchant at a strike price of $49 per share. The market price of a Merchant share is $49 on January 2, 2020 (the intrinsic value is therefore $0). On March 31, 2020, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Prepare the journal entry to record the purchase of the call option on January 2, 2020. (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 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 2, 2020 enter an account title to record the transaction on January 2, 2020 enter a debit amount enter a credit amount enter an account title to record the transaction on January 2, 2020 enter a debit…
On January 2, 2020, Jones Company purchases a call option for $300 on Merchant common stock. The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $50 per share. The market price of a Merchant share is $50 on January 2, 2020 (the intrinsic value is therefore $0). On March 31, 2020, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Instructions a. Prepare the journal entry to record the purchase of the call option on January 2, 2020. b. Prepare the journal entry(ies) to recognize the change in the fair value of the call option as of March 31, 2020. c. What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2020?
On October 15, 2022, East Company approved a share option plan for key executives. On January 1, 2023, 200,000 share options were granted exercisable for 200,000 ordinary shares at P10 par value. The options are exercisable between January 1, 2026 and December 31, 2028, at 80% of the quoted market price on January 1, 2023 which was P15. The fair value of the 200,000 options estimated by an appropriate option pricing model is P6 per option. Twenty thousand options were forfeited when an executive resigned in 2024. All other options were exercised on July 1, 2026 when the share price jumped unexpectedly to P20.What amount should East Company credit to share premium upon exercise of options in 2026? 1,440,000 1,560,000 2,160,000 1,600,000