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Donald Inc. has a December 31 fiscal year end and provides quarterly financial reports to its Investors. . On January 1, 20x1, Donald buys 1
Donald Inc. has a December 31 fiscal year end and provides quarterly financial reports to its Investors. . On January 1, 20x1, Donald buys 1 share of Angelo Inc. for a price of $10,000 per share. This Investment is categorized as available for sale. To mitigate the risk of a drop in price for this Investment, Donald buys a put option contract on March 31, 20x1. This put option explres on Dec. 31, 20x1 and has a strike price of $11,500. The fair value hedge is effective in the quarters in which it appears to be effective. . On November 22, 20x1, Donald receives a $750 dividend from Angelo. Date Price per Share Time Value of Put Option Jan. 1, 20x1 10,000 March 31, 20x1 11,500 125 June 30, 20x1 11,700 110 Sept. 30, 20x1 10,600 90 Dec 31, 20x1 11,650 ??? Q1/1 What is the total net effect of the Investment and the put option on Other Comprehensive Income in Q1 (Jan 1 to March 31)? Multiple Choice $0 $125 O O O $1,375
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