Johnstone AG purchased a put option on Ewing ordinary shares on July 7, 2020, for...
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Johnstone AG purchased a put option on Ewing ordinary shares on July 7, 2020, for 240. The put option is for 200 shares, and the strike price is 70. (The market price of an ordinary share of Ewing 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 67 per share 50
January 10, 2021 68 per share 40
Required:
Prepare the journal entries for Johnstone for the following dates.
a. July 7, 2020Investment in put option on Ewing shares.
b. September 30, 2020Johnstone prepares financial statements.
c. December 31, 2020Johnstone prepares financial statements.
d. January 10, 2021 Johnstone settles the put option on the Ewing shares
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