Saved Required information The following information applies to the questions di

Question

Saved Required information The following information applies to the questions displayed below.) Dahila is in the 32 percent tax rate bracket and has purchased the following shares of Microsot common stock over the years: Date Purchased SharesBasis 7/10/2088400 12,00 4/28/2009 1/29/2818580 12,230 11/82/2012 30010,758 308 250 7,300 if Dahlia sells 800 shares of Microsoft for $40,000 on December 20.2018, whet is her capital gain or loss in each of the following assumptions? (Do not round intermediate colculations.) e. She uses the FIFO method.

Explanation / Answer

Under the FIFO method, sales consists of the earliest purchases.

shares sold of 800 consists of 400 shares from 7/10/2008 purchases, 300 shares from 4/20/2009 purchases and 100 shares from 1/29/2010 purchases.

Cost of shares sold = $12,000 + $10,750 + ($12,230/500*100)

= $12,000 + $10,750 + $2,446

= $25,196

Gain = sale price - Cost

= $40,000 - $25,196

= $14,804

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