Starling Corporation has accumulated E & P of $60,000 on January 1,2013.In 2013,Starling Corporation had an operating loss of $80,000.It distributed cash of $40,000 to Zoe,its sole shareholder,on December 31,2013.Starling Corporation's balance in its E & P account as of January 1,2014,is:

Question

Quizplus · Accepted Answer

Starting with the accumulated E&P of $60,000 on January 1, 2013, the corporation had an operating loss of $80,000 in 2013. This leaves a deficit of $20,000 in the E&P account at the end of 2013 ($60,000 - $80,000 = -$20,000). The distribution of cash of $40,000 to the sole shareholder on December 31, 2013, reduces the E&P balance further by $40,000, resulting in a balance of $60,000-$80,000-$40,000= -$20,000, which is a deficit. Therefore, the correct answer is B.

Starling Corporation Has Accumulated E & P of $60,000 on January