A15-25 Derivatives (LO 15-7) Dauphinee DL Corp. plans to purchase 100,000 shares of Santos Technology Ltd., a publicly traded company. Dauphinee has signed a contract to acquire the shares from Holding Co. in 90 days, after certain approvals are obtained; these approvals are routine but time consuming. The agreed-upon price per share is $22.50, which is the fair value of the shares on the day the contract was signed. Santos shares have traded between $5 and $35 over the last year; the industry has been volatile. Sixty days after signing this agreement, it is Dauphinee’s year-end, and Santos shares are trading for $28. At the time the contract matured, and the shares are purchased; the shares are trading for $16. Required:
3. Prepare journal entries to record the inception of the contract, the change in its fair value at year-end, and its maturity. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
| No. | Account Titles and Explanation | Debit | Credit |
| 1 | Cash (100000 x $22.50) | $2,250,000 | |
| Share capital | $2,250,000 | ||
| (To record the issuance of shares) | |||
| 2 | Share capital | $2,250,000 | |
| Cash | $2,250,000 | ||
| (For maturity of agreement and purchase of shares) |
A15-25 Derivatives (LO 15-7) Dauphinee DL Corp. plans to purchase 100,000 shares of Santos Technology Ltd.,...
Dauphinee DL Corp. plans to purchase 121,000 shares of Santos Technology Ltd., a publicly traded company. Dauphinee has signed a contract to acquire the shares from Holding Co. in 90 days, after certain approvals are obtained; these approvals are routine but time consuming. The agreed-upon price per share is $23.00, which is the fair value of the shares on the day the contract was signed. Santos shares have traded between $8 and $34 over the last year; the industry has...