On May 1 of the current year, Orr Company purchases a call option on 15,000 bushels of corn with delivery in July for a premium of $1,200 and a strike price of $3.05 per bushel.The values of the option at the end of May and June are $1,125 and $1,007, respectively.The option is sold on July 7th for $1,133.Orr Company prepares monthly financial statements.
A)On May 1, Orr Company records a memo entry to record acquisition of the contract which has no value.
B)For May, Orr Company records a gain on the contract of $75.
C)For June, Orr Company records a loss of $193.
D)At the sale of the option contract on July 7, Orr Company records a gain of $126.

Question

On May 1 of the current year, Orr Company purchases a call option on 15,000 bushels of corn with delivery in July for a premium of $1,200 and a strike price of $3.05 per bushel.The values of the option at the end of May and June are $1,125 and $1,007, respectively.The option is sold on July 7th for $1,133.Orr Company prepares monthly financial statements.
A)​On May 1, Orr Company records a memo entry to record acquisition of the contract which has no value.
B)​For May, Orr Company records a gain on the contract of $75.
C)​For June, Orr Company records a loss of $193.
D)​At the sale of the option contract on July 7, Orr Company records a gain of $126.

Quizplus · Accepted Answer

The Answer of On May 1 of the current year, Orr Company purchases a call option on 15,000 bushels of corn with delivery in July for a premium of $1,200 and a strike price of $3.05 per bushel.The values of the option at the end of May and June are $1,125 and $1,007, respectively.The option is sold on July 7th for $1,133.Orr Company prepares monthly financial statements.
A)​On May 1, Orr Company records a memo entry to record acquisition of the contract which has no value.
B)​For May, Orr Company records a gain on the contract of $75.
C)​For June, Orr Company records a loss of $193.
D)​At the sale of the option contract on July 7, Orr Company records a gain of $126.

On May 1 of the Current Year, Orr Company Purchases