AC 302 Chapter 17 Problem Question 13

AC 302 Chapter 17 Problem Question 13
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P 17-13 (Derivative Financial Instrument) The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, 						
						
Miller Co. purchased a call option on Wade common shares on July 7, 2012, for						$240.00 
The call option is for		200 	shares (notional value), and the strike price is			
$70.00 	. (The market price of a share of Wade stock on that date is					
$70.00 	) The option expires on January 31, 2013. The following data are available with 					
respect to the call option						
Date		 Market Price of Wade Shares			Time Value of Call Option	
September 30, 2012		$77.00 		per share	$180.00 	
December 31, 2012		$75.00 		per share	$65.00 	
January 4, 2013		$76.00 		per share	$30.00 	
						
Instructions:						
"(a) Prepare the journal entry for Miller Co. for July 7, 2012—Investment in call option on
     Wade shares."						
						
						
Jul 7, 12	Account title				Amount	
	Account title					Amount
						
"(b) Prepare the journal entry for Miller Co. for September 30, 2012—Miller prepares financial
    statements."						
						
						
Sep 30, 12	Account title				Amount	
	Account title					Amount
						
Sep 30, 12	Account title				Amount	
	Account title					Amount
						
"(c) Prepare the journal entry for Miller Co. for December 31, 2012—Miller prepares financial
    statements."						
						
						
Dec 31, 12	Account title				Amount	
	Account title					Amount
						
Dec 31, 12	Account title				Amount	
	Account title					Amount
						
(d) Prepare the journal entry for Miller Co. for January 4, 2013—Miller settles the call option on the Wade shares.						
						
						
Jan 4, 13	Account title				Amount	
	Account title					Amount
						
Jan 4, 13	Account title				Amount	
	Account title					Amount
						
Jan 4, 13	Account title				Amount	
	Account title				Amount	
	Account title					Amount
						
		Call Option				
						
						
						
						
						
						
		Formula