A-9: Call optionOn 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 appraisalestimated 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$170March 31$160May 10$165At 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

Call Option: A call option is a financial contract that gives the holder the right, but not the…

Answered: On March 1, 2022, Jensen Corp.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Under its executive stock option plan, Boston Corporation granted options on January 1, 2021, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were anticipated; however, unexpected turnover during 2022 caused the forfeiture of 5% of the stock options. Ignoring taxes, what is the effect on earnings in 2022? Multiple Choice -$18.5 million. -$18 million. -$19 million. -$20 million.
On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third company, Galaxy Company. Sunco settled the options in cash on June 16, 2020. Following are additional details pertaining to the option: Number of shares that can be purchased with the call option 7,400 Call option exercise price per share $ 10.03 Market price per share of Galaxy Company on May 1, 2020 $ 10.03 Price paid by Sunco to purchase the option $ 1,800 Market price per share of Galaxy Company on May 31, 2020 $ 11.24 Fair value of call option on May 31, 2020 $ 9,200 Market price per share of Galaxy Company on June 16, 2020 $ 11.29 Fair value of call option on June 16, 2020 $ 8,800 Sunco has a year end of May 31. Required: Prepare the journal entries required on the books of Sunco Limited on each of the…
value of the stock option is P90 if the exercise price is P180. If the exercise price is the exercise price will be P180. On Jan. 1, 2018, the entity estimated that the fair PROBLEM 8-7 On Jan. 1, 2018, TOMAS COMPANY granted 5,000 common stock options to the CEO, conditional upon the executive's remaining in the entity's employ until the end of 2020. The par value per share is P100 and the exercise price is P240. However, if earnings increase by at least 10% per year over the 3-year period, P240, the fair value of the stock option is P80. The carnings of the company increased over the 3-year period as follows: 2018. .10% 2019.. 2020.. .11% . 3% REQUIRED: Compute the compensation expense for 2018, 2019, and 2020 as a result of the stock options. 2. Prepare journal entries related to the stock options. PROBLEM 8-8 On Jan. 1, 2018, JORGE COMPANY granted 20 stock options to each of the 1,000 employees. Each grant is conditional upon the employee remaining in service for three (3) years.…
Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options to buy each share, estimated by an appropriate option pricing model on the date of grant, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on reported earnings in the year after the options are granted to executives? O $0 O $20 million O $60 million O $90 million
Godo
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 $130 per share, with an expiration date of May 31, 2022. The option contract premium (the amount paid to enter the contract at signing) was $40. On March 31, a market appraisal estimated the time value of the option to be $30. Hudson settled the option contract on May 10. Prices of ICA stock during the option period are provided below. Price of ICA stocks March 1 $130 March 31 $120 May 10 $125 At what amount would Hudson report as the value of the put option in its March 31, 2022 balance sheet? Put Option account balance as of March 31, 2022 4,000
On Jan. 1, 2010, EASY Company granted ABC, its executive, compensatory share options to buy 10,000 share of P10 par value. The options call for a price of P20 per share and are exercisable in 3 years following grant date. ABC exercised the options on December 31, 2010. The market price of the share was P60 on January 1, 2010 and P70 on December 31,2010. The fair value of the share option is P30 on the date of grant. By what net amount should equity increase as a result of the grant and exercise of the options?
Fortune Brands granted options on January 1, 2024, that allows the recipient to purchase 15.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2026 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? Note: Round your answer to 1 decimal place. Multiple Choice O $60.0 million $90.0 million $0 $20.0 million
Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2018, that permit executives to purchase 12 million of the company's $1 par common shares within the next six years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Suppose that the options are exercised on April 3, 2021, when the market price is $19 per share. Ignoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet 1 Record entry for options exercised on April 3, 2021, when the market price is $19 per share. Note: Enter debits before credits. Date April 03, 2021…
Blossom Inc, purchases a call option contract on January 2, 2023, from Baird Investment Corp. The option gives Blossom the right to purchase 3,270 Laredo Corp. shares (the underlying) at $220 per share (the exercise/strike price), and it expires April 30, 2023. For the right to buy the shares at this fixed price, Blossom pays a premium of $880. This is a financial derivative because the underlying is anancial asset the Laredo shares.At the time of the transaction, Laredo shares are trading at $220. If the price of Laredo shares increases above $220, Blossom canexercise the option and purchase the shares for $220 per share. Alternatively. Blossom may sell the option to someone else.Prepare the related journal entry for Blossom at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry. If no entry is required, select "No Entry"
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 Reguired: Prepare the journal entries for Yates Co. for the following dates: a. January 7, 2014-Investment in put option on Dixon shares. b. March 31, 2014-Yates prepares financial statements. June 30, 2014-Yates prepares financial statements. с. d. July 6, 2014- Yates settles the put option on the Dixon shares.
Orange Inc. issued 20,000 nonqualified stock options valued at $20,000 (in total). The options vest over two years-half in 2019 (the year of issue) and half in 2020. One thousand options are exercised in 2020 with a bargain element on each option of $6. What is the 2020 book-tax difference associated with the stock options? Part I: A) $15,000 favorable B) $ 6,000 favorable C) $15,000 unfavorable D) $ 4,000 unfavorable Part II: What is the permanent difference related to this exercise of 1,000 option?

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