On January 31 of the Current Year,Sophia Pays $1,000 for an Option

question 2

Multiple Choice

On January 31 of the current year,Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31.As of December 31,Sophia had not exercised the option or sold it.Which of the following statements is correct?

• A)Sophia may recognize a $1,000 STCL.
• B)Sophia may recognize a $1,000 LTCL.
• C)Sophia may recognize a $1,000 ordinary income.
• D)Sophia may not recognize a loss.

---

Definitions:

Capital Items

Long-term assets acquired for the purpose of generating income, not intended for resale in the normal course of business.

Regular Course

The usual manner or routine followed in conducting business or academic activities under normal circumstances.

Performance

The execution of an action or the operation of a machine, system, or organization, and how well it accomplishes intended tasks or goals.

Description by Brand

The detailed information or specifications of products provided, highlighting characteristics or features associated with a particular brand.