An investor purchased 200 shares of XYZ stock at $25 per share, plus a $300 brokerage commission. He then sold 100 shares of the XYZ stock at $35 per share, paying a $200 commission on the sale. He will record a
A) $1,000 gain on the sale of the investment.
B) $500 gain on the sale of the investment.
C) $650 gain on the sale of the investment.
D) $850 gain on the sale of the investment.
Purchase price of Investment
Purchase price of Investment = Share price + Brokerage fees for 100 shares
= [100 Shares x $25.00] + [$300 x (100/200)]
= $2,500 + $150
Net Sale proceeds
Net Sale proceeds = Sales Value – Sales commission
= [100 Shares x $35.00] - $200
= $3,500 - $200
Here, the Sale Value is higher than the Purchase cost
Therefore, the gain on the sale of the investment = Sale value – Purchase cost
= $3,300 - $2,650
Hence, the answer will be (C) $650 gain on the sale of the investment.
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