Question

A customer owns 1,000 shares of XAM at $40 a share. If XAM declares a 10% stock dividend, what is the adjusted cost basis per share?

A. 1,000 shares at $36.36 per share
B. 1,100 shares at $40 per share
C. 1,100 shares at $36.36 per share
D. 900 shares at $44 per share

Answer 1

The adjusted cost basis per share after a 10% stock dividend would be $36.36 per share. Option C is correct.

Step-by-step explanation:

To calculate the adjusted cost basis per share after a 10% stock dividend, we need to divide the original cost basis by the total number of shares after the dividend.

Original cost basis = Number of shares bought * Price per share = 1,000 shares * $40 = $40,000

Total number of shares after the dividend = Number of original shares + Stock dividend = 1,000 shares + (10% * 1,000 shares) = 1,000 shares + 100 shares = 1,100 shares

Adjusted cost basis per share = Original cost basis / Total number of shares after the dividend = $40,000 / 1,100 shares = $36.36 per share