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Prepare the September journal entry

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Question - On August 1, 2020, Pina Ltd. purchased a call option from Starco Corporation. The option gave Pina the right to buy 7,400 shares in a third company, Dillon Ltd., at a price of $10 per share. On the day Pina purchased the option, Dillon shares were trading at $10 each. Pina paid $1,500 for the options. On August 31, 2020, the Dillon shares were trading at $12 each, and the options for Dillon shares were trading at $25,700. On September 15, Pina settled the options in cash when the Dillon shares were trading at $16 and the options were trading at $44,400.

Required -

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

2. Prepare the September 15 journal entry settling the option for cash, and assuming Pina accepted instead the shares in Dillon.

Reference no: EM133034104

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