Journal Questions
For each of the following scenarios, prepare journal entries, general ledger, trial balance, income statement, and balance sheet.
Long Put, Nonhedging—Functional Currency US$
Cloud Fund had the following trades in Sun in the options market through David Brother brokers. The stock exchange requires that the writer of the options maintain 10 percent of the value of the contract as margin money throughout the life of the contract. On January 1, Cloud Fund introduced $100,000 as capital. We will prepare
Date Product StrikePrice Expiry Quantity Rate B/S Brokerage
20-Jan-X1 Put $50 16-Mar-X1 12,000 $5.00 B $450
24-Feb-X1 Put $50 16-Mar-X1 14,000 $4.00 B $600
12-Mar-X1 Put $50 16-Mar-X1 15,000 $4.00 S $400
Liquidation Method
FIFO
Market Rate of Underlying Stock, Sun
January 31: 48.00
February 28: 43.00
March 16: $55
Market Rate of Sun Put Option with Strike Price $50, expiry March 16
January 31: 2
February 28: 6.00
Long Put, Nonhedging—Trade Currency SGD
Cerebros Fund had the following trades in ABB in the options market through James Brothers brokers. The stock exchange requires that the writer of the options maintain 10 percent of the value of the contract as margin money throughout the life of the contract. On January 1, Cerebros introduced $125,000 as capital.
Date Product StrikePrice Expiry Quantity Rate (SGD) B/S Brokerage (SGD)
20-Jan-X1 Put SGD 50 17-Mar-X1 15,000 9.00 B 600
22-Feb-X1 Put SGD 50 17-Mar-X1 12,000 5.00 B 520
12-Mar-X1 Put SGD 50 17-Mar-X1 14,000 6.00 S 700
Liquidation Method
FIFO
Market Rate of Underlying Stock, ABB
January 31: 48.00
February 28: 44.00
March 16: $55
Market Rate of ABB Put Option with Strike Price $50, Expiry March 17
January 31: 3
February 28: 5.00
FX Rate SGD/US$
January 20: 1.5210
January 31: 1.532
February 22: 1.4956
February 28: 1.500
March 12: 1.5148
March 17: 1.5463
Short Put, Nonhedging—Trade Currency INR
ABC Fund had the following trades in Andhra Bank in the options market through Silver Man brokers. The stock exchange requires that the writer of the options maintain 10 percent of the value of the contract as margin money throughout the life of the contract. On January 3, ABC Fund introduced $200,000 as capital and converted $100,000 into INR at 42.5 on the same date.
Date Product StrikePrice Expiry Quantity Rate (INR) B/S Brokerage (INR)
23-Jan-X1 Put INR 50 16-Mar-X1 10,000 5.00 S 540
23-Feb-X1 Put INR 50 16-Mar-X1 16,000 4.00 S 620
10-Mar-X1 Put INR 50 16-Mar-X1 16,000 3.00 B 320
Liquidation Method
FIFO
Market Rate of Underlying Stock, Andhra Bank
January 31: 49.00
February 28: 44.00
March 16: $55
Market Rate of Andhra Bank Put Option with Strike Price $50, Expiry March 16
January 31: 2
February 28: 6.00
FX Rate INR/US$
January 23: 42.56
January 31: 43.56
February 23: 42.86
February 28: 44.00
March 10: 41.56
March 16:42.00
Short Put, Nonhedging—Trade Currency SGD
Billionaire Fund had the following trades in SingTel shares in the options market through ASC Man brokers. The stock exchange requires that the writer of the options maintain 10 percent of the value of the contract as margin money throughout the life of the contract. On September 23 Billio-naire Fund introduced $200,000 as capital.
Date Product StrikePrice Expiry Quantity Rate (SGD) B/S Brokerage
23-Sep-X1 Put SGD 50 16-Nov-X1 10,000 5.00 S 540
23-Oct-X1 Put SGD 50 16-Nov-X1 8,000 4.00 S 440
10-Nov-X1 Put SGD 50 16-Nov-X1 12,000 3.00 B 720
Liquidation Method
FIFO
Market Rate of Underlying SingTel:
September 30: S$48.00
October 31: S$43.00
November 16: S$55
Market Rate of SingTel Put Option with Strike Price S$50, Expiry March 16
September 30: S$2
October 31: S$6.00
FX Rate SGD/US$
September 23: 1.5210
September 30: 1.532
October 23: 1.4956
October 31: 1.500
November 10: 1.5148
October 16:1.5463
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