Question

In: Accounting

George bought the following amounts of Stock A over the years: (Loss amounts should be indicated...

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?

Solutions

Expert Solution

(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:


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