On January 1, 2022, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: • Number of shares: 100 • Strike price: $320 per share • Expiration date: April 30, 2022 • Total cost of the option contract: $90 • Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $320 per share. The following additional information is known: • On March 31, 2022, the price of XYZ stock was $340 per share. A market appraisal indicated that the time value of the option contract was $70. . On April 5, 2022, the price of XYZ stock was $335 per share. A market appraisal indicated that the time value of the option contract was $60. On this date, Mills settled the option contract. Required: 1. Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to the option contract.
On January 1, 2022, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: • Number of shares: 100 • Strike price: $320 per share • Expiration date: April 30, 2022 • Total cost of the option contract: $90 • Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $320 per share. The following additional information is known: • On March 31, 2022, the price of XYZ stock was $340 per share. A market appraisal indicated that the time value of the option contract was $70. . On April 5, 2022, the price of XYZ stock was $335 per share. A market appraisal indicated that the time value of the option contract was $60. On this date, Mills settled the option contract. Required: 1. Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to the option contract.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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N1.
Account
Transcribed Image Text:On January 1, 2022, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows:
• Number of shares: 100
Strike price: $320 per share
• Expiration date: April 30, 2022
• Total cost of the option contract: $90
• Seller of the option contract: First Investment Bank
On January 1, 2022, XYZ stock was trading at $320 per share.
The following additional information is known:
• On March 31, 2022, the price of XYZ stock was $340 per share. A market appraisal indicated that the time value of the
option contract was $70.
• On April 5, 2022, the price of XYZ stock was $335 per share. A market appraisal indicated that the time value of the
option contract was $60. On this date, Mills settled the option contract.
Required:
1. Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to
the option contract.
Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to the
option contract.
Balance Sheet (current assets):
$
Gain on settlement of call option
Income Statement (partial):
$
Net gain (unrealized, NI)
Show Transcribed Text
2,000
2,000
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