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Prepare the journal entries for outkast

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Question - On August 15, 2013, Outkast Co. invested idle cash by purchasing a call option on Counting Crows, Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. (Market price of an Outkast share is $40). The option expires on January 31, 2014. The following data are available with respect to the call option.

Market Price of Counting

Time Value of Call

Date

Crows Shares

Option 09/30/13 $48/share $180

12/31/13 $46/share 65

01/15/14 $47/share 30

Prepare the journal entries for Outkast for the following dates:

(a) Investment in call option on Counting Crows shares on August 15, 2013

(b) September 30, 2013 - Outkast prepares financial statements.

(c) December 31, 2013 - Outkast prepares financial statements.

(d) January 15, 2014 - Outkast settles the call option on the Counting Crows shares

Reference no: EM132072814

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