What should be the initial cost of new investment

Assignment Help Financial Accounting
Reference no: EM132769018

On December 15, 2019, Parker Company entered into a call option contract that gives the right but not an obligation to purchase 3,000 shares issued by Esther Company on April 15, 2020, at an exercise price (strike price) of P100 per share. Parker paid P3 for each option shares.

On December 31, 2019, market data suggests that Parker Company could sell option for P4 and Esther Company's share are selling at P100 per share. On April 15, 2020, the fair value of each option is P10 and Esther Company's share are selling at P110 per share.

Problem 1: If Parker Company exercised its right on April 15, 2020, what should be the initial cost of its new investment assuming the new investment is classified as available for sale?

Group of answer choices

a. P312,000

b. P300,000

c. P330,000

d. P309,000

Reference no: EM132769018

Questions Cloud

What option asset should sc company recognize on february : What option asset should SC Company recognize on February 1, 2019? SC Company the right to sell, and San Miguel Corp. the obligation to buy
Explain how banks make lending decisions : Explain how banks make lending decisions. Explain in detail liabilities and asset side of commercial bank balance sheet
Implementation of innovation technologies : This week's journal article focuses on attribution theory and how it influences the implementation of innovation technologies. Two types of employee attribution
Components of construction project management : Discussing the components of construction project management that occur in the pre-construction planning phase.
What should be the initial cost of new investment : April 15, 2020, what should be the initial cost of its new investment assuming the new investment is classified as available for sale?
What is a mobile equipment identifier : What is a Mobile Equipment Identifier (MEID) and what is it used for? As an examiner, why is it important for you to understand how a call is routed through.
Effective vision for health care organization : Explains the purpose and characteristics of developing an effective vision for a health care organization.
Analysis of US Health Insurance data : Analysis of US Health Insurance data - provide you with some examples of the application of data analysis - Conduct a preliminary analysis
Find amount of derivative asset should parker company : Esther Company on April 15, 2020, What amount of derivative asset should Parker Company recognize on December 31, 2019?

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the actual return on plan asset

Compute the actual return on plan assets: fair value of plan assets at the beginning of the period. What is the Actual return on plan asset?

  Which is correct about corporate governance

The Sarbanes-Oxley (SOX) Act was enacted to improve transparency in financial accounting and to prevent fraud. Which of the following is correct?

  Differences in financial accounting-managerial accounting

Discuss two basic differences between financial accounting and managerial accounting. In addition, identify the primary stakeholders concerned with financial accounting and managerial accounting.

  Determine the total bond interest expense to be recognized

Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign in your response.)

  Compute the budgeted gross profit

Suppose Kitchen HelpersKitchen Helpers manufactures cast iron skillets. One model is a? 10-inch skillet that sells for $36. Kitchen HelpersKitchen Helpers projects sales of 550 ?10-inch skillets per month. The production costs are $8 per skillet for ..

  Find profit from changing currency values

Find profit from changing currency values. Andrea Cujoli is a currency speculator who enjoys "betting" on changes in the foreign currency

  What type of business activity used the greatest amount

What type of business activity used the greatest amount of cash in 2019? As an investor, would you find this use of cash troubling?

  Calculate the taxable profit and current income tax

Calculate the taxable profit and current income tax for the year ended 31 December 2019.A building was sold on 01 January 2019 at a profit of R350 000.

  What is the balance in gross accounts receivable

There are two ways to calculate this estimate:1) % of sales (or % of a/r) and 2) an aging of the individual accounts receivable customer balances.

  What is p and g accounting policy related to advertising

What is P&G's accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financial statements?

  Prepare flowcharts for two business processes

As part of the planning process for your new accounting information system, your supervisor has asked that you prepare flowcharts. This graphic presents the flow of information through the accounting cycles. Using the company information provided in ..

  Which statement about auto insurance premiums is false

Which statement about auto insurance premiums is false? Most states allow insurers to an insured's credit rating as a factor to establish premiums.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd