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In 2017, Rachel purchased 200 shares of common stock in a software firm. Rachel paid $800...

In 2017, Rachel purchased 200 shares of common stock in a software firm. Rachel paid $800 for the first 100 shares and $1,000 for the next 100 shares. Later in the year, the company declared a 2 for 1 common stock split. Rachel's new basis in the stock is:

a) average of 400 shares at $4.50 per share.

b) 200 shares at $8 per share and 200 shares at $10 per share.

c) 400 shares at $18 per share.

d) 200 shares at $4 per share and 200 shares at $5 per share.

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Answer #1

    Before stock split After stock split

Share Price value   Share Price value

100 $8 $800 200 $4 $800

100 $10 $1000 200 $5   $1000

Answer d

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