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Question(s) / Instruction(s):

*Pr. 17-118—Free-standing derivative.
Yates Co. purchased a put option on Dixon common shares on July 7, 2007, for $215. The put option is for 300 shares, and the strike price is $51. The option expires on July 31, 2007. The following data are available with respect to the put option:

 

Date

 

Market Price of Dixon Shares

Time Value of Put Option

 

March 31, 2007

$48 per share

$120

 

June 30, 2007

$50 per share

54

 

July 6, 2007

$46 per share

16

*Pr. 17-118 (cont.)

Instructions
Prepare the journal entries for Yates Co. for the following dates:
(a)     January 7, 2007—Investment in put option on Dixon shares.
(c)     March 31, 2007—Yates prepares financial statements.
(d)     June 30, 2007—Yates prepares financial statements.
(e)     July 6, 2007—Yates settles the call option on the Dixon shares.

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