Naples Corporation Issued Call Options on 20,000 Shares of VESPUS

question 3

Essay

Naples Corporation issued call options on 20,000 shares of VESPUS Inc. on October 21, 2019. These options give the holder the right to buy VESPUS shares at $35 per share until May 17, 2020. For issuing these options, Naples received $60,000. On December 31, 2020 (Naples's fiscal year-end), the options traded on the Montreal Exchange for $3.50 per option. On May 17, 2020, VESPUS's share price increased to $40 and the option holders exercised their options. Naples had no holdings of VESPUS shares.
Required:
For Naples Corporation, record the journal entries related to these call options.

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Definitions:

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