George bought the following amounts of Stock A over the years: (Loss amounts should be indicated with a minus sign.) Date Purchased Number of Shares Adjusted Basis Stock A 11/21/1993 1,100 $ 26,400 Stock A 3/18/1999 550 9,900 Stock A 5/22/2008 850 30,600 On October 12, 2019, he sold 1,350 of his shares of Stock A for $38 per share. a. How much gain/loss will George have to recognize if he uses the FIFO method of accounting for the shares sold

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.

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