What should be the initial cost of the new investment

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Reference no: EM132795214

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: EM132795214

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