Several years ago, kurt paid $15,000 for 1,000 shares of stock in abc. during the current year abc declares a three-for-one stock split. shortly thereafter, kurt sells 1,000 shares of abc stock for $12,000. his recognized gain on the sale of the 1,000 shares is: a. $7,000.b. $2,000.c. $0.d. $12,000.e. $5,000.

A. $7,000

Explanation:

Kurt paid $15,000 for 1,000 shares.

As ABC company declares 3-for-1 stock split, the new number of shares = 1,000 × 3 = 3,000 shares.

New purchase price of each share = $15,000 ÷ 3,000 = $5.

1,000 shares price = 1,000 × 5 = $5,000.

Kurt sells 1,000 shares for $12,000.

Therefore, recognized gain = $(12,000 - 5,000) = $7,000.

However, because of stock split, Kurt gets high profit including an unrecognized profit too.

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