Prepare the journal entries to record the transactions

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Problem - On August 1, 2020, Splish Led. purchased a call option from DDR Investments Corporation. The option gave Splish the right to buy 14,000 shares in a third company, MGL Ltd., at a price of $21.25 per share. On the day Splish purchased the option, MGL shares were trading at $21.25 each. Splish paid $600 for the options. On August 31, 2020, the MGL shares were trading at $23.25 each, and the options for MGL shares were trading at $28,400. On September 15, Splish settled the options in cash when the MGL shares were trading at $24.50, and the options were trading at $45,500.

Required -

1. Prepare the journal entries to record the above transactions.

2. Prepare the September 15 journal entry assuming Splish accepted instead the shares in MGL.

Reference no: EM132721502

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