Question

Assume Carin sells her 30-percent interest in Blue S Corp, Inc. to Cami on January 16, 2018. Using the daily allocation method, how much income does Carin report if Blue earned $20,000 from January 1 to January 15 and a total of $500,000 from January 1 through December 31, 2018?

a. $20,000.
b. None of the choices are correct.
c. $6,000.
d. $6,164.

Answer 1

Answer:

correct option is d. $6,164

Explanation:

given data

sells = 30 percent

earned  = $20,000

total = $500,000

time = 15 days

to find out

how much income does Carin report

solution

we get here income that is reported is

income = 30 % of total in 15 days

income = 30% × $500,000  × $\frac{15}{365}$

income = 0.30 × $500,000  × 0.0410958

income = $6164

so correct option is d. $6,164