Beginning in 2011, the AAA of Ewing, Inc., an S corporation, has a balance of $725,000. During the year, the following items occur. Ewing's ending AAA balance is:

Question

Beginning in 2011, the AAA of Ewing, Inc., an S corporation, has a balance of $725,000. During the year, the following items occur.  Ewing's ending AAA balance is:

Quizplus · Accepted Answer

The ending AAA balance can be calculated as follows:

Beginning AAA balance: $725,000
Add: Net income for the year: $500,000
Add: Tax-exempt income: $50,000
Add: Income from S corporation subsidiaries: $20,000
Less: Shareholder distributions: $161,850
Ending AAA balance: $1,134,150

Therefore, the correct answer is B) $1,134,150.