On January 2, 2011, U.S. Buyers, Inc. purchased 5,000 shares of the 20,000 shares outstanding of Latino Corporation stock for $15,000. The following information was reported by Latino during 2011: U.S. Buyers, Inc. sold all of its Latino Corporation stock on March 1, 2012, for $3.10 per share. The total amount U.S. Buyers, Inc. should report on the sale is

Question

On January 2, 2011, U.S. Buyers, Inc. purchased 5,000 shares of the 20,000 shares outstanding of Latino Corporation stock for $15,000. The following information was reported by Latino during 2011:  U.S. Buyers, Inc. sold all of its Latino Corporation stock on March 1, 2012, for $3.10 per share. The total amount U.S. Buyers, Inc. should report on the sale is

Quizplus · Accepted Answer

To determine the gain or loss on the sale of the stock, we need to calculate the basis of the stock and the amount received from the sale.

Basis of stock = purchase price / number of shares purchased
Basis of stock = $15,000 / 5,000 shares
Basis of stock = $3.00 per share

Amount received from sale = selling price per share x number of shares sold
Amount received from sale = $3.10 per share x 5,000 shares
Amount received from sale = $15,500

To calculate the gain or loss, we subtract the basis of the stock from the amount received from the sale.

Gain/Loss = Amount received from sale - Basis of stock
Gain/Loss = $15,500 - ($3.00 per share x 5,000 shares)
Gain/Loss = $15,500 - $15,000
Gain/Loss = $500 loss

Therefore, the total amount U.S. Buyers, Inc. should report on the sale is a $500 loss, which is answer choice C.