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Question(s) / Instruction(s):

*Pr. 17-117—Derivative financial instrument.
Kelley Co. purchased a put option on Flynn common shares on July 7, 2007, for $100. The put option is for 200 shares, and the strike price is $30. The option expires on January 31, 2008. The following data are available with respect to the put option:




Market Price of Flynn Shares

Time Value of Put Option


September 30, 2007

$32 per share



December 31, 2007

$31 per share



January 31, 2008

$33 per share


Prepare the journal entries for Kelley Co. for the following dates:
(a)     July 7, 2007—Investment in put option on Flynn shares.
(b)     September 30, 2007—Kelley prepares financial statements.
(c)     December 31, 2007—Kelley prepares financial statements.
(d)     January 31, 2008—Put option expires.

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