A person owned 300 shares of MNO common stock, which cost $23,400. MNO then had a 3-for-1 stock split. After the split, the person sold 100 shares for $5,600. How much gain (or loss) resulted from the sale?
A 3-for-1 stock split means that the number of shares is multiplied by 3, and becomes 900 shares. Cost of one share before split: [tex] \frac{23,400}{300}=\$78 [/tex] Cost of one share after split: [tex] \frac{23,400}{900}=\$26 [/tex] Cost of 100 shares before split:[tex] 78\times100=7800 [/tex] Cost of 100 shares after split:[tex] 26\times100=2600[/tex] The above sale result in loss of: [tex] 7800-2600=\$5200[/tex]
