Bruin Company reports current E&P of $200,000 in 20X3 and accumulated E&P at the beginning of the year of $100,000. Bruin distributed $400,000 to its sole shareholder on January 1, 20X3. How much of the distribution is treated as a dividend in 20X3?
A)$400,000
B)$300,000
C)$200,000
D)$100,000

Question

Quizplus · Accepted Answer

Since the distribution of $400,000 exceeded Bruin's accumulated E&P of $100,000 at the beginning of the year and its current E&P of $200,000 for the year, $300,000 of the distribution must be treated as a dividend in 20X3. The remaining $100,000 would be a return of capital.

Bruin Company Reports Current E&P of $200,000 in 20X3 and Accumulated