Prepare the may journal entry assuming petty accepted

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On April 1, 2021, Petty Ltd. purchased a call option from Fidelity Investments Corporation. The option gave Petty the right to buy 5,000 shares in Monahan Ltd., at a price of $ 50 per share. On the day Petty purchased the option, Monahan shares were trading at $ 50 each. Petty paid $ 1,000 for the options. On April 30, 2021, the Monahan shares were trading at $ 53.50 each, and the options for Monahan shares were trading at $ 18,000. On May 15, Petty settled the options in cash when the Monahan shares were trading at $ 56 and the options were trading at $ 30,000.

Instructions

Problem a) Prepare the journal entries to record the above transactions.

Problem b) Prepare the May 15 journal entry assuming Petty accepted the shares in Monahan instead.

Reference no: EM132776682

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