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Hummel Company purchased a put option on Olney common shares on July 7, 2014, for...

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Question

Accounting

Hummel Company purchased a put option on Olney common shares on July 7, 2014, for $100. The put option is for 200 shares, and the strike price is $30. The option expires on January 31, 2015. The following data are available with respect to the put option:

Date Market Price of Olney Shares Time Value of Put Option

September 30, 2014 $32 per share $52

December 31, 2014 $31 per share 22

January 31, 2015 $33 per share 0

Instructions

Prepare the journal entries for Hummel Company for the following dates:

(a) July 7, 2014Investment in put option on Olney shares.

(b) September 30, 2014 Hummel prepares financial statements.

(c) December 31, 2014 Hummel prepares financial statements.

(d) January 31, 2015Put option expires.

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