A non-CCPC has an LRIP balance of $78,000 at the end of the 2019 fiscal year. In 2020, the company wishes to pay a dividend of $250,000. During 2020, prior to the payment of the dividend, the company receives eligible dividends of $35,000 and non-eligible dividends of $85,000. How much of the $250,000 dividend must be paid as a non-eligible dividend before an eligible dividend can be designated?

Question

Quizplus · Accepted Answer

The company must pay out the LRIP balance of $78,000 as a non-eligible dividend before designating any dividends as eligible. Therefore, the remaining amount to be paid as non-eligible dividend is $250,000 - $78,000 = $172,000.

The non-eligible dividends received during the year ($85,000) can be used to offset the non-eligible dividend paid out, leaving a balance of $87,000 to be paid as non-eligible dividend.

Therefore, the company must pay $87,000 as non-eligible dividend, and the remaining $163,000 can be designated as eligible.

Thus, the best choice is C.

A Non-CCPC Has an LRIP Balance of $78,000 at the End