Question

Problem 14-39 (Algorithmic) (LO. 1, 2, 3) Kevin purchases 1,000 shares of Bluebird Corporation stock on October 3, 2019, for $445,000. On December 12, 2019, Kevin purchases an additional 750 shares of Bluebird stock for $311,500. According to market quotations, Bluebird stock is selling for $445 per share on 12/31/19. Kevin sells 500 shares of Bluebird stock on March 1, 2020, for $249,200. a. The adjusted basis of Kevin's Bluebird stock on December 31, 2019, is $ 756,500 . Feedback Check My Work b. What is Kevin's recognized gain or loss from the sale of Bluebird stock on March 1, 2020, assuming the shares sold are from the shares purchased on December 12, 2019? In your computations, round the per share amount to the nearest whole dollar and use the rounded it in subsequent computations. Kevin's recognized gain is $ C. What is Kevin's recognized gain or loss from the sale of Bluebird stock on March 1, 2020, assuming Kevin cannot adequately identify the shares sold? Kevin has a recognized gain of $

Answers to b and c are not $41,533 and $0 respectively.

Answer 1

Answer b Calculation of Kevin's recognized gain or loss from the sale of Bluebird stock on March 1, 2020 assuming the shares sold are from the shares purchased on December 12, 2019 Kevin's Recognized Gain = Amount Realized - Adjusted Basis = $249,200 - [($311,500 / 750 shares) x 500 shares) = $249,200 - [$415 x 500 shares] = $249,200 - $207,500 = $41,700 c Calculation of Kevin's recognized gain or loss from the sale of Bluebird stock on March 1, 2020, assuming Kevin cannot adequately identify the shares sold Kevin's Recognized Gain = Amount Realized - Adjusted Basis = $249,200 - [($445,000 / 1,000 shares) x 500 shares] = $249,200 - $445 x 500 shares] = $249,200 - $222,500 = $26,700