merchant account
fow asked:


On January 2, 2002, X Co. purchases a call option for $350 on Merchant common stock. The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $50 per share. The market price of a Merchant share is $50 on January 2, 2002 (the intrinsic value is therefore $0). On March 31, 2002, the market price for Merchant stock is $58 per share, and the time value of the option is $200.

Prepare journal entries to recognize the change in the fair value of the call option as of March 31, 2002.

1. First record the change in the time value and then the change in the intrinsic value.

2. What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2002?

1.
Unrealized Holding Gain or Loss-Income
Call Option
(To record time value change)

2.
Call Option
Unrealized Holding Gain or Loss-Income

Can someone tell me how much i debit/credit these accts for?

Also, Unrealized Holding Gain= ??
i have tried it. There is no problem like this in my textbook that shows how to do this NOR any slides for my class that has this problem. How am i suppose to do this then? Even everyone in my class is complaining about this professor.