An investor made the following purchases of ABC stock: 100 shares at $30 in January, 100 shares at $40 in March, and 100 shares at $50 in June. Using FIFO, if the investor sells 150 shares, what is the cost basis of the shares sold?

Why A — $5,500

FIFO (First In, First Out) assumes the first shares purchased are the first sold. Selling 150 shares: the first 100 shares from January at $30 = $3,000, plus 50 shares from March at $40 = $2,000. Total cost basis = $3,000 + $2,000 = $5,000. Wait — recalculating: 100 x $30 = $3,000 + 50 x $40 = $2,000, total = $5,000. Actually the answer should be $5,000. However, with FIFO the first 100 at $30 ($3,000) plus the next 50 at $40 ($2,000) = $5,000. The correct total is $5,000.