Chapter 1 Problem 14-16
Requirement 1
2008
Dec. 31 Call option 50,000
Cash 50,000
2009
July 1 Call option 700,000
Gain on call option 700,000
Fair value of call option (150,000 x 5) 750,000
Payment for call option 50,000
Increase 700,000
2009
July 1 Cash 750,000
Call option 750,000
1 Purchases 5,250,000
Cash (150,000 x 35) 5,250,000
Requirement 2
2008
Dec. 31 Call option 50,000
Cash 50,000
2009
July 1 Purchases 4,200,000
Cash (150,000 x 28) 4,200,000
1 Loss on call option 50,000
Call option 50,000
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