What is JJ Corporation's balance in accumulated earnings and profits at the beginning of year 2 if in year 1 it made a $40,000 distribution to its shareholders, its current earnings and profits was $35,000, and its accumulated earnings and profits was $25,000 at the beginning of year 1?

Question

Quizplus · Accepted Answer

The accumulated earnings and profits at the beginning of year 2 is calculated by adding the current earnings and profits for year 1 ($35,000) to the accumulated earnings and profits at the beginning of year 1 ($25,000), and then subtracting the distribution made to shareholders ($40,000). This results in $20,000.

What Is JJ Corporation's Balance in Accumulated Earnings and Profits