At the Beginning of the Year,Ms

question 62

Multiple Choice

At the beginning of the year,Ms.Faro paid $15,000 for 750 shares of Gravois stock.She instructed her broker to reinvest any dividends in additional Gravois shares.Her Form 1099-DIV reported that she earned $820 dividend income which purchased 39 additional shares.Which of the following statements is true?

• A)Ms.Faro recognizes no dividend income and has a $15,000 basis in her 789 shares.
• B)Ms.Faro recognizes no dividend income and has a $15,820 basis in her 789 shares.
• C)Ms.Faro recognizes $820 dividend income and has a $15,820 basis in her 789 shares.
• D)None of the above statements is true.

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Definitions:

Machine-Hours

A measure of the amount of time a machine is operated, used in manufacturing to allocate costs or determine efficiency.

Equipment Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the wear and tear, or obsolescence of physical equipment.

Machining Activity

The process of removing material from a piece of work through methods like cutting, drilling, or milling.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on their usage of resources.