In: Accounting
George bought the following amounts of Stock A over the years: (Loss amounts should be indicated with a minus sign.)
Date Purchased | Number of Shares | Adjusted Basis | ||
Stock A | 11/21/1994 | 1,230 | $ | 29,520 |
Stock A | 3/18/2000 | 615 | 11,070 | |
Stock A | 5/22/2009 | 980 | 35,280 | |
On October 12, 2020, he sold 1,545 of his shares of Stock A for $38 per share.
a. How much gain/loss will George have to recognize if he uses the FIFO method of accounting for the shares sold?
b. How much gain/loss will George have to recognize if he specifically identifies the shares to be sold by telling his broker to sell all 980 shares from the 5/22/2009 purchase and 565 shares from the 11/21/1994 purchase?
(a) Compute gain/loss recognized on sale as per FIFO method as follows:
Hence, gain as per FIFO is $23,520.
Workings:
Compute cost basis of shares sold as follows:
(b) Compute gain/loss recognized on sale as follows:
Hence, gain on sale of shares is $9,870.
Workings:
Compute cost basis of shares sold as follows: