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Prepare journal entry to record the purchase of call option

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Reference no: EM132487798

On April 1, 2020, Ivanhoe Ltd. paid $155 for a call to buy 470 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel's shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel's stock was $34 per share, and the fair value of the option was $6,680.

Question a. Prepare the journal entry to record the purchase of the call option on April 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Question b. Prepare the journal entry to recognize the change in the call option's fair value as at June 30, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Question c. Prepare the journal entry that would be required if Ivanhoe Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Reference no: EM132487798

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