Bill Henricksen,purchased a Put Option on Cycle Inc

question 32

Multiple Choice

Bill Henricksen,purchased a put option on Cycle Inc.for $4.The put option has a strike price of $40 and currently Cycle Inc.shares trade for $44.The expiration date of the option is 6 months from today.What is Henricksen's maximum gain on his put option?

• A) $4
• B) $36
• C) $40
• D) $44

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Definitions:

Equity Method

An accounting technique used to record the investments in other companies where the investor has significant influence but does not fully control the investee.

Excess Amortizations

Excess Amortizations refer to the amount by which amortization expenses exceed what is deemed necessary or standard for a given period, often adjusting the value of intangible assets.

Intra-Entity Transactions

Transactions occurring between divisions or departments within the same company.

Intra-Entity Gross Profit

The profit realized from transactions within segments of the same company, not reflected in consolidated financial statements until realized externally.