Question

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.

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.