David Plc Acquired a Parcel of 50 000 Call Options

question 48

Multiple Choice

David Plc acquired a parcel of 50 000 call options in Goliath Plc on 1 November 2012.The price of the options was €1.50 each and they may be exercised any time prior to 30 June 2015 at exercise price of €30.On the same date the market price for Goliath Ltd shares is €25.On David Plc's reporting period date - 30 June 2013 - the company is still holding the options.The market price of the options at that time was €1.80 each and the share price is €27. What is the financial effect of the above transactions on David Ltd's statement of comprehensive income for the year ending 30 June 2013?

• A)Increase by €15 000
• B)Decrease by €15 000
• C)Increase by €100 000
• D)Decrease by €100 000

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Definitions:

Wages

Payments made to employees for their labor, typically calculated on an hourly, daily, or piecework basis.

Economic Rent

The excess payment made to a factor of production over and above what would be needed to keep it in its current use.

Marginal Revenue Product

The additional revenue generated from employing one more unit of input, such as labor or capital.

Primary Labor Market

The segment of the labor market that consists of high-paying jobs with good benefits and job security, often requiring higher education or specialized skills.