Question

1.Denise needed money to purchase a new car.  She decided to sell 100 shares of IBM.  She bought the following blocks of stock.  Assume that Denise did not specifically tell her broker, which shares to sell.  What is her cost basis for the shares sold?

Jan. 2016  - Purchased 50 shares @ $32 per share

Mar. 2018 – Purchased 20 shares @ $40 per share

May 2019 – Purchased 40 shares @ $30 per share

July 2019 – Purchased 25 shares @ $34 per share

A. $3,410.

B. $3,330.

C. $3,300

D. $3,450

E. None of the above

can you please show the calculations thank you.

Answer 1

Answer : C. $3300

Calculated as

FIFO method is followed for calculating the cost basis

Shares sold from following purchases on FIFO basis
	NO. of Shares		Cost per share
Jan. 2016	50	x	$               32.00	=	$ 1,600
Mar. 2018	20	x	$               40.00	=	$     800
May. 2019	30	x	$               30.00	=	$     900
Cost basis of the shares sold	$ 3,300