On March 1, 2022, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $90 per share, with an expiration date of May 31, 2022. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below. March 1 March 31 May 5 Price of SST stock: $90 $80 $85 Time value of option: $50 $40 $30 Required: 1. What is cost of the option paid by Ferguson Corp. on March 1, 2022? 2. Compute the balance of the option account on May 5 before the settlement

On March 1, 2022, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $90 per share, with an expiration date of May 31, 2022. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below. March 1 March 31 May 5 Price of SST stock: $90 $80 $85 Time value of option: $50 $40 $30 Required: 1. What is cost of the option paid by Ferguson Corp. on March 1, 2022? 2. Compute the balance of the option account on May 5 before the settlement

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter15: Shareholders’ Equity: Capital Contributions And Distributions

Section: Chapter Questions

Problem 17E

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A-11: Put option On March 1, 2022, Hudson Corp. purchased a put option on shares of ICA stock. The contract was for 100 shares at a strike price of $120 per share, with an expiration date of May 31, 2022. The option contract premium was $30. On March 31, a market appraisal estimated the time value of the option to be $20. Hudson settled the option contract on May 10. Prices of ICA stock during the option period are provided below. March 1 $120 March 31 $110 May 10 $115 At what amount would Hudson report as the value of the put option in its March 31, 2022 balance sheet? Price of ICA stock: Put Option account balance as of March 31, 2022: $ 6,000
On March 1, 2025, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $120 per share, with an expiration date of May 31, 2025. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below. March 1 March 31 May 5 Price of SST stock: $120 $110 $115 Time value of option: $30 $20 $10 Required: 1. Compute the cost of the option paid by Ferguson Corp. on March 1, 2025. 2. Compute the balance of the option account on date of settlement.
A-9: Call option On March 1, 2022, Jensen Corp. purchased a call option on shares of YTV stock. The contract was for 100 shares at a strike price of $170 per share, with an expiration date of May 31, 2022. The option contract premium was $40. On March 31, a market appraisal estimated the time value of the option to be $30. Jensen settled the option contract on May 10. Prices of YTV stock during the option period are provided below. March 1 $170 March 31 $160 May 10 $165 At what amount would Jensen report as the value of the call option in its March 31, 2022 balance sheet? Price of YTV stock: Call Option account balance as of March 31, 2022: $ 500
A-9: Call option On March 1, 2022, Jensen Corp. purchased a call option on shares of YTV stock. The contract was for 100 shares at a strike price of $170 per share, with an expiration date of May 31, 2022. The option contract premium was $40. On March 31, a market appraisal estimated the time value of the option to be $30. Jensen settled the option contract on May 10. Prices of YTV stock during the option period are provided below. Price of YTV stock: March 1 $170 March 31 $160 May 10 $165 At what amount would Jensen report as the value of the call option in its March 31, 2022 balance sheet? Call Option account balance as of March 31, 2022: $ 500 x
Aa.36. Accounting for Call Options On January 2, Starz Inc. established an agreement with Silver Co. allowing Starz Inc. to call 100 shares of Gold Inc. stock at a strike price of $45 per share through June 30 of the following year. On January 2, the current market price of Gold Inc. is $45 and the option premium is $200. On June 30, the fair value of the option is $900. Required a. Prepare the journal entry on January 2 to record the purchase of the call option. b. Prepare the entry to adjust the call option to fair value on June 30. At what price per share of Gold Inc. will the call option become valuable to Starz Inc.?● Note: Round your answer to the nearest penny.
Problem 1 (Adapted)On January 1, 2017, Gliezel company issued options to key employees to purchase 20,000 ordinary shares of P100 par value at P125 per share. On such date, the market value of ordinary share is P150 per share. The fair value of each share option is P30. These options are exercisable starting January 1, 2019 and expire one year after. Options covering 17,500 shares are exercised on January 15, 2019 and the remaining options expired. a. Compute compensation expense for the year 2017, 2018 and 2019.b. Prepare journal entries to record the compensation each year as well as the exercise and expiration of the share options
You purchase one MBI July 120 put contract (equaling 100 shares) for a premium of $3. You hold the option until the expiration date, when MBI stock sells for $123 per share. You will realize a ________ on the investment. $300 loss $300 profit $500 loss $200 profit $500 profit
Case 1On January 1, 2018, Darna company granted an employee an option to purchase 40,000 ordinary shares with P5 par value at P20 per share. The option became exercisable on December 31, 2019, after the employee completed two years of service. The fair value of the share option is P15. The option was exercised on January 15, 2020. The share prices are P30 on January 1, 2018, P50 on December 31, 2019, and P60 on January 15, 2020. What is the compensation expense for 2018? Prepare the journal entry to record compensation and the exercise of share options.
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?
EXERCISE 4 On January 1, 2020, Cherry Red Company issued 10,000 share options for the purchase of P 100 par value ordinary share at a strike price of P 120 per share, to its key employees. The share options vest anytime once the share price reached P 200, up to December 31,2022. It is expected that the share price of the company would reach P 200 on December 31,2022. The options are exercisable until the end 2023. Based on the pricing model used by the company, the fair value of the share option on January 1,2020 is P 20. REQUIRED: a) Assume that the market price of the company's share reached P 200 in December 2021 and share options were exercised in 2022. Prepare entries for years 2020 through 2022. b.) Assume that the market price of the company's share reached P 200 in December 2022. Eighty percent of the options were exercised in 2023 and the remainder lapsed. Prepare entries for years 2020 through 2023. c.) How will the entries differ if the company's share reached a market price…
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?
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.