The treasurer of Hing Wa Corp has read on the #1320

The treasurer of Hing Wa Corp. has read on the Internet that the stock price of Ewing Inc. is
about to take off. In order to profit from this potential development, Hing Wa purchased a call
option on Ewing common shares on July 7, 2014, for $240. The call option is for 200 shares
(notional value), and the strike price is $70. The option expires on January 31, 2015. The
following data are available with respect to the call option:

Date Fair Value of Option Market Price of Ewing Shares

Sept. 30, 2014 ............... $1,340 ...................................... $76 per share

Dec. 31, 2014 ................. $ 825 ...................................... $73 per share

Jan. 4, 2015 .................. $1,200 ..................................... $75 per share

Instructions

Prepare the journal entries for Hing Wa for the following dates:

(a) July 7, 2014: Invests in call option on Ewing shares.

(b) September 30, 2014: Hing Wa prepares financial statements.

(c) December 31, 2014: Hing Wa prepares financial statements.

(d) January 4, 2015: Hing Wa settles the call option net on the Ewing shares (that is, without
buying the shares).

The treasurer of Hing Wa Corp has read on the

ANSWER
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