Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on july 4, 2020, stargazer, inc., purchased a call

On July 4, 2020, StarGazer, Inc., purchased a call option for $ 5,400, giving it...

60.1K

Verified Solution

Question

Accounting

On July 4, 2020, StarGazer, Inc., purchased a call option for $ 5,400, giving it the right to buy 3,000 shares of MarzBarz, Inc., at $30 per share at any time during the next six months. On September 30, the option value was $11,200 which the company duly recorded in its books. On November 15, 2020, when the market price of the MarzBarz shares were $38, StarGazer exercised the call option and took delivery of the shares. The entry on the books to record the transaction on November 15 would be

a.

Investment In MarzBarz ...... DR $11,200; Derivatives - Financial Assets ...... CR $11,200

b.

Cash ...... DR $12,000; Derivatives - Financial Assets ...... CR $5,400; Gain On Derivatives ...... CR $6,600

c.

Cash ...... DR $11,200; Gain On Derivatives ...... CR $11,200

d.

Fair Value Investments In MarzBarz .... DR $90,000; Derivatives - Financial Assets .... CR $5,400; Cash .... CR $73,400;Gain On Derivatives ...... CR $11,200

e.

Fair Value Investments In MarzBarz .... DR $114,000; Derivatives - Financial Assets .... CR $11,200; Cash .... CR $90,000;Gain On Derivatives ...... CR $12,800

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Jensen Company owns a building in a suburban industrial park. It purchased the building four years...

Statistics
1.2K views

A researcher wishes to investigate the idea that eating sea salt raises blood pressure less than...

Medical Sciences
1.2K views

1. Consider two blood vessels that have the same length and resistance. Given these pressure differentials along...

Basic Math
1.2K views

a. Find the mean, standard deviation, and five number summaries for each type of M&M (plain...

General Management
1.2K views

The reference desk of a university library receives requests for assistance. Assume that a Poisson probability...

Basic Math
1.2K views

A copyright is an intangible asset with an indefinite useful life True or False Truc

Calculus
1.2K views

D Question 3 Determine the equations of the vertical a function f x f x...

Accounting
1.2K views

Floyd, a cash basis taxpayer, sold land in which he had a basis of $10,000,...

Accounting
1.2K views

Check out the table below for current minimum wages: US federally mandated hourly minimum wage...

Accounting
1.2K views

Use the following information to answer questions 20 22. Sales revenue is $80,000, 8,000...

Accounting
1.2K views

Flaherty is considering an investment that, if paid for immediately, is expected to return $153,000...

Accounting
1.2K views

Journalize the following sales transactions for Paul Sportswear. Explanations are not required. The company estimates...