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:

ekkarill92 answered 1 year ago

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