Question

Assume Joe Harry sells his 25 percent interest in Joe's S Corp., Inc., to Tyrone on January 29. Using the daily allocation method, how much income does Joe Harry report if Joe's S Corp., Inc., earned $255,000 from January 1 to January 29 and a total of $3,467,500 from January 1 through December 31 (365 days)?

a. $50,000.
b. $200,000.
c. $28,000.
d. $112,000.
e. None of the choices are correct.

Answer 1

$68,875

Step-by-step explanation:

Calculation of how much income does Joe Harry report Using the daily allocation method

Since on January 1 to January 29 a total of $3,467,500 was earned in which we as well assumed that Joe Harry sells his 25% interest in Joe's S Corp., Inc., to Tyrone on that same January 29,This means we have to divide the total amount earned by the numbers of days in a year which is 365 days, then multiply it by both 29days(January 1 to January 29) and the 25% Interest.

Hence,

($3,467,500/365 days) × 29 days × 25%

=$9,500×29 days ×25%

=$68,875

Therefore the amount of income that Joe Harry report will be $68,875