On March 1, 2025, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at astrike price of $120 per share, with an expiration date of May 31, 2025. Ferguson settled the option on May 5 (assume cashsettlement). Additional information pertaining to the option is provided below.March 1March 31May 5Price of SST stock:$120$110$115Time value of option:$30$20$10Required: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.

An option gives the option-holder a right to exercise the option and buy/sell the underlying asset.…

Answered: On March 1, 2025, Ferguson Corp.…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 5MC

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A-12: Put option 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 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?
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?
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: $120 per share • Expiration date: April 30, 2022 •Total cost of the option contract paid at signing: $90 • Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $120 per share. The following additional information is known: . On March 31, 2022, the price of XYZ stock was $140 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 $135 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 Complete this question by entering your answers in the tabs below. Req 1 Indicate…
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 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: $120 per share Expiration date: April 30, 2022 Total cost of the option contract paid at signing: $90 .Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $120 per share. The following additional information is known: . On March 31, 2022, the price of XYZ stock was $140 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 $135 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. ed Complete this question by entering your answers in the tabs below. Req 1 Indicate any…
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.
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.
P16.3 Brondon Corp. purchased a put option on Mykia common shares on July 7, 2023, for $480. The put option is for 350 shares, and the strike price is $50. The option expires on January 31, 2024. The following data are available with respect to the put option: Date Sept. 30, 2023 Dec. 31, 2023 Jan. 31, 2024 Instructions Prepare the journal entries for Brondon for the following dates: July 7, 2023: Invests in put option on Mykia shares. 1 September 30, 2023: Brondon prepares financial statements. 1. December 31, 2023: Brondon prepares financial statements. January 31, 2024: Put option expires. Fair Value of Option $250 100 O Market Price of Mykia Shares $56 per share $58 per share $62 per share
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.
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.
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

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