(Fair Value Hedge) On November 3, 2007, S Co. invested $200,000 in 4,000 shares of the common stock of J Co. S classified this investment as available-for-sale. S Co. is considering making a more significant investment in J Co. at some point in the future but has decided to wait and see how the stock does over the next several quarters.

To hedge against potential declines in the value of J stock during this period, S also purchased a put option on the Johnstone stock. Sprinkle paid an option premium of $600 for the put option, which gives S the option to sell 4,000 J shares at a strike price of $50 per share. The option expires on July 31, 2007. The following data are available with respect to the values of the J stock and the put option.

Date	Market Price of J Shares	Time Value of Put Option
December 31, 2006	$51 per share	$375
March 31, 2007	54 per share	175
June 30, 2007	55 per share	40

a. Prepare the journal entries for S Co. for the following dates.

1. November 3, 2006Investment in J stock and the put option on J shares.

2. December 31, 2006S Co. prepares financial statements. 3. March 31, 2007S prepares financial statements. 4. June 30, 2007S prepares financial statements.

5. July 1, 2007S settles the put option and sells the J shares.