Question

A person owned 300 shares of MNO common stock, which cost $23,400. MNO then had a 3-for-1 stock split. After the split, the person sold 100 shares for $5,600. How much gain (or loss) resulted from the sale?

Answer 1

A 3-for-1 stock split means that the number of shares is multiplied by 3,

and becomes 900 shares.

Cost of one share before split: 23,000/900=$78

Cost of one share after split: 23,000/900=$26

Cost of 100 shares before split:78*100=7800

Cost of 100 shares after split:26*100=2600

The above sale result in loss of: 7800-2600=$5200