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.

• 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.