JKL Corporation had a balance of $25,000 in accumulated earnings and profits at the beginning of the year.Its current earnings and profits for the year were $10,000.During the year, JKL made two distributions: $30,000 on June 1 and $20,000 on October 1.The distribution on October 1 represents a dividend of

Question

Quizplus · Accepted Answer

The total earnings and profits available for distribution are $35,000 ($25,000 beginning balance + $10,000 current earnings). The first distribution of $30,000 on June 1 is covered by the earnings and profits, leaving $5,000 available. Therefore, the October 1 distribution of $20,000 includes a $5,000 dividend, as only $5,000 of the distribution can be covered by the remaining earnings and profits.

JKL Corporation Had a Balance of $25,000 in Accumulated Earnings