Question

Problem 7-42 (LO 7-2) [The following information applies to the questions displayed below.] Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years: Date Purchased Shares Basis 7/10/2009 430 $ 14,190 4/20/2010 330 12,804 1/29/2011 530 14,098 11/02/2013 280 9,016 If Dahlia sells 890 shares of Microsoft for $47,170 on December 20, 2019, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.) Problem 7-42 Part-a a. She uses the FIFO method.

Answer 1

Dahlia bought common stocks of Microsoft only

Date of purchase no.of stocks. Amount($)

7/10/09. 430. 14190

4/20/10. 330. 12804

11/29/11. 530. 14098

11/02/13. 280. 9016

Total. 1570. 50108

On Dec 20,2019, she sold 890 units of stocks for $47170.

To calculate capital gains she used to follow FIFO(First In First Out) method.i.e., stocks purchased first should be sold at first.

Particulars. No.of Units amount

Total stocks sold = 890. $47170

_stocks bought on 7/10/09. (430). $(14190)

_stocks bought on 4/20/10. (330). $(12804)

Balance bought on 1/29/11. (130). $(3458)*

Capital gains = $16718

* For 530 stocks cost was $14098., Then for 130 units is 130/530*14098=3458.