Novak Co purchased a put option on Ewing common shares on Ju

Novak Co. purchased a put option on Ewing common shares on July 7, 2017, for $252. The put option res, and the strike price is $75. (The market price of a share of Ewing stock on that date is $75.) The option expires on January 31, 2018. The following data are available with respect to the put option. Date September 30, 2017 December 31, 2017 January 31, 2018 Market Price of Ewing Shares $82 per share 80 per share 83 per share Time Value of Put Option $122 46 Prepare the journal entries for Novak Co. for the following dates. (a) July 7, 2017-Investment in put option on Ewing shares. (b) September 30, 2017- Novak prepares financial statements. (c) December 31, 2017-Novak prepares financial statements (d) January 31, 2018 Put option expires. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account tities and enter o for the amounts.)

Solution

Date Account Tittles and Explaination Debit Credit (a) July 07 2017 Put option $252 Cash $ 252 (b) September 30 2017 Unrealized holding gain or loss - income ($252 - $122) $130 Put option $ 130 (c) December 31 2017 Unrealized holding gain or loss - income ($122 - $46) $   76 Put option $    76 (d) January 31 2018 Loss on settlement of put option ($46 - $0) $   46 Put option $    46