Answer:
George
Using the FIFO method of accounting for the shares sold, the gain to be recognized is $20,400.
Explanation:
a) Data:
Date Purchased Number of Shares Adjusted Basis Cost/unt
Stock A 11/21/1993 1,100 $ 26,400 $24
Stock A 3/18/1999 550 9,900 $18
Stock A 5/22/2008 850 30,600 $36
On October 12, 2019, he sold 1,350, $38 per share
Stock A remaining 1,150
Stock A:
Cost of sales = 1,100 x $24 = $26,400
plus 250 x $18 = $4,500
Total cost of sales $30,900
Sales revenue 1,350 x $38 = $51,300
Gain on sale $20,400
b) The FIFO (First-In, First-Out) method is an inventory method of recognizing the cost of goods sold and the ending inventory based on the assumption that the items that were first brought into inventory are the the ones to be sold. With this method, the cost of sales will be determined by the earlier purchases of inventory while the cost of ending inventory will be calculated based on the later purchases of inventory. Other methods in use in inventory costing are the Last-In, First-Out, the Weighted-Average, and Specific Identification Methods.
