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Mega Company believes the price of oil will increase in the coming months. Therefore, it decides to purchase call options on oil as a

price$-$risk$-$hedging device to hedge the expected increase in prices on an anticipated purchase of oil.

On November $30,20$X$1,$ Mega purchases call options for $11,000$ barrels of oil at $$32$ per barrel at a premium of $$2$ per barrel with a

March $1,202,$ call date. The following is the pricing information for the term of the call:

The information for the change in the fair value of the options follows:

On March $1,20\backslash$times $2,$ Mega sells the options at their value on that date and acquires $11,000$ barrels of oil at the spot price. On June $1,$

$202,$ Mega sells the oil for $$36$ per barrel.

Required:

a$.$ Prepare the journal entry required on November $30,201,$ to record the purchase of the call options

b$.$ Prepare the adjusting journal entry required on December $31,201,$ to record the change in time and intrinsic value of the options.

c$.$ Prepare the entries required on March $1,202,$ to record the expiration of the time value of the options, the sale of the options, and

the purchase of the $11,000$ barrels of oil.

d$.$ Prepare the entries required on June $1,202,$ to record the sale of the oil and any other entries required as a result of the option.

Record the decrease in the time value of the options to current earnings.

Note: Enter debits before credits.

Record the increase in the intrinsic value of the options to other

comprehensive income.

Note: Enter debits before credits.

Record the entry to reclassify into earnings the other comprehensive income

from the cash flow hedge.

Note: Enter debits before credits.

NOTE: I only need a few of the journal entries, but I have provided all the correct ones on the second picture

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