Question

Fibro Inc. pays $27,000 to buy stock in another company and an additional $750 in commissions. 3 months later, Fibro sells the stock for $25,000. At the time of the sale, Fibro will recognize a:

1) a $2,000 loss
2) a $2,750 gain
3) a $750 loss
4) a $2,750 loss

Answer 1

Fibro Inc. will recognize a loss of $2,750.

Step-by-step explanation:

To determine the recognition at the time of the sale, we need to calculate the net gain or loss from the transaction. Fibro Inc. paid $27,000 to buy the stock and an additional $750 in commissions, resulting in a total cost of $27,750. After 3 months, Fibro sells the stock for $25,000. To calculate the net gain or loss, we subtract the selling price from the total cost: $25,000 - $27,750 = - $2,750.

Since the result is a negative value, Fibro will recognize a loss of $2,750.