Journal Questions
For the following scenarios, prepare journal entries, general ledgers, trial balance, income statement, and balance sheet.
Put Option as a Hedge—Trade Currency SGD
Konark Fund had the following trades of Lever shares 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.
Date Product StrikePrice(SGD) Expiry Quantity Rate(SGD) B/S Brokerage(SGD)
23-Jan-X1 Put 50 16-Mar-X1 10,000 5.00 B 540
23-Feb-X1 Put 50 16-Mar-X1 8,000 4.00 B 440
10-Mar-X1 Put 50 16-Mar-X1 12,000 3.00 S 720
Liquidation Method
FIFO
Market Rate of Underlying Stock, Lever
January 31: S$48.00
February 28: S$ 43.00
March 16: S$55
Market Rate of Lever Put Option with Strike Price $50, Expiry March 16
January 31: S$2
February 28: S$6.00
FX Rate SGD/US$
January 23: 1.5210
January 31: 1:1.532
February 23: 1.4956
February 28: 1.500
March 10: 1.5148
March 16: 1.5463
Functional Currency
US$
Put Option as a Hedge—Functional Currency US$
Orange Fund had the following trades of Tomco shares in the options market through SMK 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.
Date Product StrikePrice Expiry Quantity Rate B/S Brokerage
20-Jan-X1 Put $50 16-Mar-X1 10,000 $5.00 B $450
21-Feb-X1 Put $50 16-Mar-X1 8,000 $4.00 B $500
13-Mar-X1 Put $50 16-Mar-X1 12,000 $3.00 S $690
Liquidation Method
FIFO
Market Rate of Underlying Stock, Tomco
January 31: 48.00
February 28: 43.00
March 16: $56
Market Rate of Tomco Put Option with Strike Price $50, Expiry March 16
January 31: $2
February 28: $6.00
Functional Currency
US$
Call Option as a Hedge—Trade Currency AUD
KKR Fund had the following trades in Zenith shares in the options market through Khan 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 KKR Fund introduced US$100,000 as capital and converted US$50,000 into AUD at a rate of 1.24.
Date Product StrikePrice Expiry Quantity Rate (AUD) B/S Brokerage (AUD)
21-Jan-X1 Call AUD 40 15-Mar-X1 12,000 4.00 B $500
20-Feb-X1 Call AUD 40 15-Mar-X1 13,000 5.00 B $600
12-Mar-X1 Call AUD 40 15-Mar-X1 15,000 4.00 S $300
Liquidation Method
FIFO
Market Rate of Underlying Stock, Zenith (AUD)
January 31: 35.00
February 28: 40.00
March 16:45
Market Rate of Zenith Call Option with Strike Price $40, Expiry March 15
January 31: 3
February 28: 5.00
FX Rate AUD/US$
January 21: 1.2178
January 31: 1.28964
February 20: 1.26345
February 28: 1.24789
March 12: 1.23645
March 15: 1.27893
Functional Currency
US$
Call Option as a Hedge—Functional Currency US$
Konrad Fund had the following trades in Home Depot in the Options market through MMT brokers. On January 1 Konrad Fund introduced $100,000 as capital.
Date Product StrikePrice Expiry Quantity Rate B/S Brokerage
25-Jan-X1 Call $50 16-Mar-X1 10,000 $5.00 B $540
22-Feb-X1 Call $50 16-Mar-X1 16,000 $4.00 B $620
11-Mar-X1 Call $50 16-Mar-X1 16,000 $3.00 S $320
Liquidation Method
FIFO
Market Rate of Underlying Stock, Home Depot
January 31: 40.00
February 28: 55.00
March 16: $55
Market Rate of Home Depot Call Option with Strike Price $50, Expiry March 16
January 31: 2
February 28: 6.00
Functional Currency
US$
