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Prepare the journal entries for outkast

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Question - Call Option: On August 15, 2010, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $545. The notional value of the call option is 606 shares, and the option price is $61. (Market price of an Outkast share is $61.) The option expires on January 31, 2011. The following data are available with respect to the call option.

Date

Market Price of
Counting Crows Shares

Time Value
of Call Option

September 30, 2010

$73 per share

$273

December 31, 2010

$70 per share

    98

January 15, 2011

$71 per share

    45

Prepare the journal entries for Outkast for the following dates.

(a) Investment in call option on Counting Crows shares on August 15, 2010.

(b) September 30, 2010-Outkast prepares financial statements.

(c) December 31, 2010-Outkast prepares financial statements.

(d) January 15, 2011-Outkast settles the call option on the Counting Crows shares.

Reference no: EM131796330

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