On August 15, 2016, Martinez Co. invested idle cash by purchasing a call option on Counting Crows… 1 answer below »

On August 15, 2016, Martinez Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $450. The notional value of the call option is 500 shares, and the option price is $50. The option expires on January 31, 2017. The following data are available with respect to the call option.

Date

Market Price of Counting
Crows Shares

Time Value of Call
Option September 30, 2016 $60 per share $225 December 31, 2016 $58 per share 81 January 15, 2017 $59 per share 38

Prepare the journal entries for Martinez for the following dates.
(a) Investment in call option on Counting Crows shares on August 15, 2016. (b) September 30, 2016—Martinez prepares financial statements. (c) December 31, 2016—Martinez prepares financial statements. (d) January 15, 2017—Martinez settles the call option on the Counting Crows shares.

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