An Investor Accumulated 1800 Shares of Microtel Corporation Over a Period

question 287

Short Answer

An investor accumulated 1800 shares of Microtel Corporation over a period of several months. She bought 1,000 shares at $15.63, 500 shares at $19.00, and 300 shares at $21.75. What was her average cost per share? (Note: Investors who purchase shares in the same company at more than one price must eventually do this calculation. Tax rules require that the capital gain or loss on the sale of any of the shares be calculated using the weighted-average price paid for all of the shares rather than the particular price paid for the shares actually sold.)

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Definitions:

Prepaid Expense

Expenditures paid in advance for goods or services to be received in the future, treated as an asset on the balance sheet until used.

Cash Payment

A transaction in which money is paid out or expended in the form of physical currency or through electronic funds transfer.

Management Services

Professional services provided to businesses, often involving strategic advisory, financial management, or operational improvements.

Accrual Basis

This accounting method records income and expenses when they are earned or incurred, regardless of when cash transactions occur.