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Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed...

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Accounting

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an Scorporation. In the conditions listed below, how much income shouldeach report from SleepEZ for 2018 under both the daily allocationand the specific identification allocation method? Refer to thefollowing table for the timing of SleepEZ’s income.

PeriodIncome
January 1 through April 4 (94 days)$139,000
April 5 through December 31 (271 days)405,000
January 1 through December 31, 2018 (365 days)$544,000

(Do not round intermediate calculations. Round yourfinal answers to the nearest whole dollar amount.)

a. There are no sales of SleepEZ stock duringthe year.

b. On April 4, 2018, Blinkin sells his sharesto Nod.

c. On April 4, 2018, Winkin and Nod each selltheir shares to Blinkin.

Income Reported
Daily Allocation MethodSpecific Identification Method
Winkin
Blinkin
Nod

Answer & Explanation Solved by verified expert
3.6 Ratings (356 Votes)

Answer  

Income Reported
Daily Allocation Method Specific Identification Method
Winkin $     46,700 $          46,333
Nod $     46,700 $          46,333
Blinkin $   450,600 $        451,333 or 451334

Workings

Daily Allocation method
Winkin Profit = 544000*94*1/365*3 = 46700 $          46,700
Nod Profit = 544000*94*1/365*3 = 46700 $          46,700
Binkin Profit = 544000*94*1/365*3 + 544000*271/365 $        450,600
Specific Identification Method
Winkin Profit = 139000*1/3 = 46333 $          46,333
Nod Profit = 139000*1/3 = 46333 $          46,333
Binkin Profit = 139000*1/3+405000= 46333+405000 $        451,333

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