On December 1,2008,Winston Corporation Acquired 100 Shares of Linked Corporation

question 26

Multiple Choice

On December 1,2008,Winston Corporation acquired 100 shares of Linked Corporation at a cost of $40 per share.Winston classifies them as available-for-sale securities.On this same date,it decides to hedge against a possible decline in the value of the securities by purchasing,at a cost of $250,an at-the-money put option to sell the 100 shares at $40 per share.The option expires on February 20,2009.Selected information concerning the fair values of the investment and the options follow:
Assume that Winston exercises the put option and sells Linked shares on February 20,2009.

-Based on the preceding information,which of the following journal entries will be made on February 20,2009?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

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