Final answer:
Deirdre recognizes a loss of $600 on the sale of the stock to her brother. If James sells the stock for $3,200, he recognizes a gain of $800. If James sells the stock for $2,600, he recognizes a gain of $200. If James sells the stock for $2,000, he recognizes a loss of $400.
Step-by-step explanation:
a. To calculate the gain or loss that Deirdre recognizes on the sale, we need to subtract the cost of the stock from the selling price. Gain or loss is calculated as follows:
Gain or Loss = Selling Price - Cost
Deirdre sold the stock for $2,400, which is less than the cost of $3,000. Therefore, Deirdre recognizes a loss of $600 on the sale.
b. To calculate the gain or loss that James recognizes if he sells the stock for $3,200, we use the same formula:
Gain or Loss = Selling Price - Cost
The selling price is $3,200 and the cost is $2,400, so James recognizes a gain of $800.
c. If James sells the stock for $2,600, the gain or loss would be calculated as:
Gain or Loss = Selling Price - Cost
Using the formula, we have: Gain or Loss = $2,600 - $2,400 = $200. Therefore, James would recognize a gain of $200.
d. If James sells the stock for $2,000, the gain or loss would be calculated as:
Gain or Loss = Selling Price - Cost
Using the formula, we have: Gain or Loss = $2,000 - $2,400 = -$400. Therefore, James would recognize a loss of $400.