Starling Corporation has accumulated E & P of $60,000 on January 1, 2016. In 2016, Starling Corporation had an operating loss of $80,000. It distributed cash of $40,000 to Zoe, its sole shareholder, on December 31, 2016. Starling Corporation's balance in its E & P account as of January 1, 2017, is:

Question

Quizplus · Accepted Answer

Since the corporation had an operating loss of $80,000 and only distributed $40,000 to the shareholder, the corporation still has a deficit of $40,000 in its E&P account. Therefore, the balance in the E&P account as of January 1, 2017, is a $20,000 deficit ($60,000 beginning balance - $80,000 operating loss + $0 additional earnings - $40,000 distribution = -$20,000).

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