On January 31 of This Year,Mallory Pays $800 for an Option

question 36

Multiple Choice

On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

• A)$200 STCG.
• B)$800 STCG.
• C)$200 ordinary income.
• D)$800 ordinary income.

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Definitions:

Raw Materials

Basic materials that are used in the manufacturing process to produce goods and products.

January Production

January production refers to the measure of output or the total amount of goods produced by a company in the month of January.

Inventory Management

The process of ordering, storing, tracking, and controlling inventory to ensure the right quantity of stock is available when needed.

Sales Forecast

An estimate of sales for a future period, often used for planning and managing business operations.