Question

James sold 300 shares of ABC for $3,250 on 8/1. What is his possible minimum gain assuming that he purchased shares as indicated below?

1. Bought 100 ABC shares at $9.09 per share on 1/1.
2. Bought 50 ABC shares at $7.04 per share on 2/1.
3. Bought 200 ABC shares at $8.00 per share on 3/1.
4. Bought 300 ABC shares at $5.50 per share on 4/1.
5. Bought 200 ABC shares at $6.25 per share on 5/1.


options:

O $741.
O $789.
O $1,217.00.
O $1,450.00.

Answer 1

James's possible minimum gain from selling 300 shares of ABC stock, assuming he sold the more expensive shares first, is $741.00.

Step-by-step explanation:

To determine James's possible minimum gain, we need to calculate the gains from selling the 300 ABC shares, taking into account the purchase prices and amounts for the shares he bought at different times. To find the minimum gain, James would prefer to assume he sold the shares he bought at the highest cost first (using the last-in, first-out method).

So, James sold:

• 200 shares bought at $8.00 per share, and
• 100 shares bought at $9.09 per share.

Gain from selling 200 shares = (300 shares sold ÷ 300 shares total) × $3,250 = $2,166.67

Total cost of these 200 shares = 200 shares × $8.00/share = $1,600

Gain from these shares = $2,166.67 - $1,600 = $566.67

Gain from selling 100 shares = (300 shares sold ÷ 300 shares total) × $3,250 = $1,083.33

Total cost of these 100 shares = 100 shares × $9.09/share = $909

Gain from these shares = $1,083.33 - $909 = $174.33

Total minimum gain = Gain from 200 shares + Gain from 100 shares = $566.67 + $174.33 = $741.00