Question

Mr. Investor has many investments in a wide variety of financial instruments. One of the shares he has invested in over the years is Hundt Ltd., a public company. His trading history in these shares is as follows:

May 24, 2000	purchased 1,000 shares at $26 per share.
April 20, 2005	stock dividend of 10%; $25 per share transferred out of retained earnings to contributed capital.
June 10, 2015	sold 250 shares for $15 per share.
June 30, 2015	purchased 500 shares for $31 per share.

There have been no further transactions to date.

REQUIRED:

Determine the adjusted cost base of Mr. Investor's shares on June 30, 2015. Calculate the tax effects of any sales of shares. Show all calculations and round to two decimal places (example $10.60).

Answer 1

1) Adjusted cost is equal to cost less dividend earned that is 1000*26=26000 less dividend earned 1000*25=25000

so the net cost is now 1000$ only

2) The shall be calculated on profit but here shares are sold at loss of $11 per share that is $26-$15 there for 250*11$ that is 2750$

3) Adjusted cost base price on 30 june 2015 that is 750 shares@ 26$ + 500 shares @ 31$ so average is 28$ per share