Spiraling Crude Oil Prices Prompted AMAR Company to Purchase Call

Multiple Choice

Spiraling crude oil prices prompted AMAR Company to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil.On November 30,20X8,AMAR purchases call options for 20,000 barrels of oil at $100 per barrel at a premium of $4 per barrel,with a February 1,20X9,call date.The following is the pricing information for the term of the call:
The information for the change in the fair value of the options follows:
On February 1,20X9,AMAR sells the options at their value on that date and acquires 20,000 barrels of oil at the spot price.On April 1,20X9,AMAR sells the oil for $112 per barrel.
-Based on the preceding information,in the entry to record the increase in the intrinsic value of the options on December 31,20X8,

A) Purchased Call Options will be credited for $100,000.
B) Purchased Call Options will be debited for $130,000.
C) Retained Earnings will be credited for $100,000.
D) Other Comprehensive Income will be credited for $100,000.