Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1996 when he acquired 30 shares for $20 a share. In 2003, Alfred bought 150 shares at $10 a share. In 2018, Alfred acquired 200 shares at $50 a share. He intends to sell 125 shares at $60 per share in the current year (2019). If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold, what is his recognized gain

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Business

Rigoberto Vargas

22 July, 08:21

Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1996 when he acquired 30 shares for $20 a share. In 2003, Alfred bought 150 shares at $10 a share. In 2018, Alfred acquired 200 shares at $50 a share. He intends to sell 125 shares at $60 per share in the current year (2019). If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold, what is his recognized gain

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Answers (1)

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Isabella Benson · Answer 1

The correct answer is $1,250.

Explanation:

According to the scenario, the computation of the given data are as follows:

If he wants to minimize the gain So, he will sell the 125 share out of 200 share which he has bought in 2018 at $50.

So, Amount Realized after sell at $60 = 125 * $60 = $7,500

Adjusted basis from 2018 = 125 * $50 = $6,250

So, We can calculate the recognized gain by using following formula:

Recognized gain = Amount Realized - Adjusted basis

= $7,500 - $6,250

= $1,250