Inca Company reports a deficit in current E&P of ($165,000)in 20X3 and accumulated E&P at the beginning of the year of $330,000. Inca distributed $430,000 to its sole shareholder on January 1, 20X3. How much of the distribution is treated as a dividend in 20X3?
A)$0
B)$165,000
C)$330,000
D)$430,000

Question

Quizplus · Accepted Answer

The distribution is treated as a dividend to the extent of the accumulated E&P at the beginning of the year, which is $330,000. The deficit in current E&P does not reduce the accumulated E&P at the beginning of the year for the purpose of determining the dividend amount.

Inca Company Reports a Deficit in Current E&P of ($165,000)in