Stiggins Fitness Enterprises Uses Soybeans to Make One of Their

Essay

Stiggins Fitness Enterprises uses soybeans to make one of their nutritional supplement products. Stiggins anticipates a need of 500,000 pounds of soybeans in January of 2012. On November 1, 2011, Stiggins purchased a call option for 500,000 pounds of soybeans on January 1, 2012, at a price of $0.40 per pound, which is the market price on November 1. Stiggins paid $1,200 for the call option and designated this option as a hedge against price fluctuations for their January purchase of soybeans. On December 31, 2011, and January 1, 2012, the prevailing market price for soybeans is $0.45 per pound. On January 1, 2012, Stiggins purchased 500,000 pounds of soybeans.
Make the necessary entries on Stiggins's books at