On May 1 of the Current Year, Orr Company Purchases

Multiple Choice

On May 1 of the current year, Orr Company purchases a call option on 15,000 bushels of corn with delivery in July for a premium of $1,200 and a strike price of $3.05 per bushel.The values of the option at the end of May and June are $1,125 and $1,007, respectively.The option is sold on July 7th for $1,133.Orr Company prepares monthly financial statements.

A) ​On May 1, Orr Company records a memo entry to record acquisition of the contract which has no value.
B) ​For May, Orr Company records a gain on the contract of $75.
C) ​For June, Orr Company records a loss of $193.
D) ​At the sale of the option contract on July 7, Orr Company records a gain of $126.