Naples Corporation issued call options on 20,000 shares of VESPUS Inc. on October 21, 2019. These options give the holder the right to buy VESPUS shares at $35 per share until May 17, 2020. For issuing these options, Naples received $60,000. On December 31, 2020 (Naples's fiscal year-end), the options traded on the Montreal Exchange for $3.50 per option. On May 17, 2020, VESPUS's share price increased to $40 and the option holders exercised their options. Naples had no holdings of VESPUS shares.
Required:
For Naples Corporation, record the journal entries related to these call options.

Question

Quizplus · Accepted Answer

The Answer of Naples Corporation issued call options on 20,000 shares of VESPUS Inc. on October 21, 2019. These options give the holder the right to buy VESPUS shares at $35 per share until May 17, 2020. For issuing these options, Naples received $60,000. On December 31, 2020 (Naples's fiscal year-end), the options traded on the Montreal Exchange for $3.50 per option. On May 17, 2020, VESPUS's share price increased to $40 and the option holders exercised their options. Naples had no holdings of VESPUS shares.
Required:
For Naples Corporation, record the journal entries related to these call options.

Naples Corporation Issued Call Options on 20,000 Shares of VESPUS