Question

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2017 under both the daily allocation and the specific identification allocation method? Refer to the following table for the timing of SleepEZ’s income. Period Income January 1 through March 17 (76 days) $ 215,000 March 18 through December 31 (289 days) 431,000 January 1 through December 31, 2017 (365 days) $ 646,000 (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

a. There are no sales of SleepEZ stock during the year.

b. On March 17, 2017, Blinkin sells his shares to Nod.

c. On March 17, 2017, Winkin and Nod each sell their shares to Blinkin.

Ps. this is one question

Answer 1

Part A

	Daily Allocation Method	Specific Identification Method
1. Winkin	215333	215333
2. Blinkin	215333	215333
3. Nod	215333	215333

646000/3 = 215333

As there was no change in ownership, each shareholder will report $215333 in both allocation methods

Part B

	Daily Allocation Method	Specific Identification Method
1. Winkin	215333	215333
2. Blinkin	44837	71667
3. Nod	170497	359000

In daily allocation method

Winkin = 646000/3*365/365 = 215333

Blinkin = 646000/3*76/365 = 44837

Nod = 646000/3*289/365 = 170497

In specific identification method

Winkin = (215000*1/3)+(431000*1/3) = 215333

Blinkin = (215000*1/3)+(431000*0/3) = 71667

Nod = (215000*1/3)+(431000*2/3) = 359000

Part C

	Daily Allocation Method	Specific Identification Method
1. Winkin	215333	71667
2. Blinkin	44837	71667
3. Nod	556327	502667

In daily allocation method

Winkin = 646000*1/3*76/365 = 215333

Blinkin = 646000*1/3*76/365 = 44837

Nod = (646000*1/3*76/365)+(646000*289/365*3/3) = 556327

In specific identification method

Winkin = (215000*1/3) = 71667

Blinkin = (215000*1/3)= 71667

Nod = (215000*1/3)+(431000*3/3) = 502667