Prepare the September journal entry

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Question - On August 1, 2020, Blossom Ltd. purchased a call option from DDR Investments Corporation. The option gave Blossom the right to buy 18,000 shares in a third company, MGL Ltd., at a price of $22.25 per share. On the day Blossom purchased the option, MGL shares were trading at $22.25 each. Blossom paid $700 for the options. On August 31, 2020, the MGL shares were trading at $24.75 each, and the options for MGL shares were trading at $45,500. On September 15, Blossom settled the options in cash when the MGL shares were trading at $25.75, and the options were trading at $63,000.

Required -

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

B. Prepare the September 15 journal entry assuming Blossom accepted instead the shares in MGL.

Reference no: EM132772102

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