Question

An investor sells at $105 a share he/she had bought at $99 in the past. At the time of the sale, assuming a historical value accounting system,

a) Recognizes a gain of $6 per share
b) Recognizes a loss of $6 per share
c) Recognizes a gain of $99 per share
d) Recognizes a loss of $105 per share

Answer 1

When an investor sells a share at a higher price than they bought it for, they recognize a gain. In this case, the investor sold a share for $105 that they had bought for $99 in the past, resulting in a gain of $6 per share.

Step-by-step explanation:

When an investor sells a share at a higher price than they bought it for, they recognize a gain. In this case, the investor sold a share for $105 that they had bought for $99 in the past. Therefore, they recognized a gain of $6 per share because $105 - $99 = $6.

To clarify, a gain is recognized when the selling price is higher than the buying price, and a loss is recognized when the selling price is lower than the buying price. So, the correct answer is option a) Recognizes a gain of $6 per share.