Question

An investor purchased 200 shares of XYZ stock at $25 per share, plus a $300 brokerage...

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.

Homework Answers

Answer #1
  • 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

    = $2,650

    Net Sale proceeds

    Net Sale proceeds = Sales Value – Sales commission

    = [100 Shares x $35.00] - $200

    = $3,500 - $200

    = $3,300

    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

    = $650

    Hence, the answer will be (C) $650 gain on the sale of the investment.

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