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David Drew owned two shares of ABC corp commons stock. He paid 60 for one share on January 15, 2008 and 30 for one share on March 31, 2006. The corp declared a stock dividend which gave stockholders two new shares of common stock for each share owned. After the distributions of the shares to the shareholder, how many share are owned by David and what is the adjusted basis of each share.

a. 6 shares owned; 3 shares with 20/cost basis and 3 shares with 40/cost basis

b. 6 shares owned: 4 shares with 0/cost basis and 1 share with 30/cost basis and 1 share with 60/cost basis

c. 6 shares owned: 3 shares with 30/cost basis each and 3 share with 10/cost basis

d. 6 shares owned: 2 shares with 45/cost basis each and 4 sahres with 0/cost basis each.

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Accounting Basics, Accounting

Category:- Accounting Basics
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