Green Corporation has negative current earnings and profits of ($100,000) and positive accumulated earnings and profits of $200,000. A $50,000 distribution from Green to its sole shareholder will be treated as a dividend because total earnings and profits is a positive $100,000.

Question

Quizplus · Accepted Answer

According to the information given, Green Corporation has negative current earnings and profits of ($100,000) but positive accumulated earnings and profits of $200,000, which results in a total earnings and profits of $100,000. Since the distribution to the sole shareholder exceeds the negative earnings and profits, it will be treated as a dividend. Therefore, the statement is true.

Green Corporation Has Negative Current Earnings and Profits of ($100,000)