Stern Fitness Enterprises Uses Soybeans to Make One of Their

Essay

Stern Fitness Enterprises uses soybeans to make one of their nutritional supplement products.Stern anticipates a need of 700,000 pounds of soybeans in January of 2015.On November 1,2014,Stern purchased a call option for 700,000 pounds of soybeans on January 1,2015,at a price of $0.40 per pound,which is the market price on November 1.Stern paid $1,300 for the call option and designated this option as a hedge against price fluctuations for their January purchase of soybeans.On December 31,2014,and January 1,2015,the prevailing market price for soybeans is $0.45 per pound.On January 1,2015,Stern purchased 700,000 pounds of soybeans.
Make the necessary entries on Stern's books at