In 2016 Carolyn purchased two shares of common stock in a te

In 2016, Carolyn purchased two shares of common stock in a technology firm. Carolyn paid $60 for one share and $70 for the next share. Later in the year, the company declared a 2 for 1 common stock split. Carolyn\'s new basis in the stock shares is:

Solution

Carolyn\'s new basis in the stock shares is: Two shares at $30 a share and two share at $35 a share.

Explanation:

Carolyn paid =

$ 60 for one share

$70 for the next share

Company declared stock split of 2 for 1 common stock,

Therefore new basis in the stock share =

$60 / 2 = $ 30 for 2 share and

$70 /2 = $35 for 2 share