FARE Q&S P.103 #5.

12/1    Given: stock price:2,000 shares for $40 per share (the same as the current market price), The time value of the option contract is $600.

           Calculation: call option price = $600  (Intrinsic value:0, Time value:600 ) 

             G/E: call option $600 /  cash $600

12/31  Given: stock price: $43 per share, Time value: $400,

           Calulation: Intrinsic value = 2,000 shares x$ 3 = $6,000, while time value is decreased by $200.

              G/E: Call optin $6,000 / Gain (OCI) $6,000

                      Loss (NI) $200    / Call option $200

Q)Which of the following changes would reflect the proper accounting treatment for this transaction on Bann's December 31, year-end financial statement?

answer choice:  b) Othe comprehensive income will increase by $6,000. c) Net income will increase by $5,800.

Book's answer: C

My thoughts) The answer should be b) since other comprehensive income (intrinsic value) is increased by $6,000 while net income (time value) is decreased by $200.

                       We cannot net off OCI and NI. 

My question) Am I wrong with any general entries or thoughts? 





코멘트 목록

CAS Director

Fair Value Hedging 이기에 즉 주식을 구매하고 또한 Option 도 계약을 맺었기에 Stock 이 Book에 기록되므로 Fairvalue hedging method 로 기록해야 합니다. 따라서 Option value 차액인 intrinsic value 와 time value 모두 Net income 으로 기록합니다.

CAS Director

Option 만 구매했다면 Cash Flow hedging 이므로 생각하시대로 기록됩니다.


문제 자체에서, "... an option contract to purchase 2,000shares of Norte Co. stock for $40 per share (the same as the current market price)..." and "If Bann does not exercise its option until January of the subsequent year~"라고 다음해 1월까지 주식를 사는 option을 사용하지않았다고 했잖아요. 그리고, 주식과 option을 같이 구매했다면, call option 아니라, put option를 제가 J/E에 사용했을거구, 질문 자체를 하지도 않았겠지요.