Starling Corporation has accumulated E & P of $60,000 on January 1,2017.In 2017,Starling Corporation had an operating loss of $80,000.It distributed cash of $40,000 to Zoe,its sole shareholder,on December 31,2017.Starling Corporation's balance in its E & P account as of January 1,2018,is:

Question

Quizplus · Accepted Answer

The operating loss of $80,000 reduces the E&P balance to $60,000 - $80,000 = $20,000 deficit. The distribution of $40,000 to Zoe on December 31, 2017, will further decrease the E&P balance to a deficit of $60,000. Therefore, the balance in the E&P account as of January 1, 2018, is a $20,000 deficit.

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