Starling Corporation has accumulated E & P of $60,000 on January 1,2015.In 2015,Starling Corporation had an operating loss of $80,000.It distributed cash of $40,000 to Zoe,its sole shareholder,on December 31,2015.Starling Corporation's balance in its E & P account as of January 1,2016,is:

Question

Quizplus · Accepted Answer

The accumulated E&P at the beginning of 2015 was $60,000. The operating loss of $80,000 in 2015 reduces the E&P to a $20,000 deficit ($60,000 - $80,000). The distribution of $40,000 does not affect the E&P balance for the purpose of calculating the deficit, as it is already in a deficit position. Thus, the E&P account as of January 1, 2016, is a $20,000 deficit.

Starling Corporation Has Accumulated E & P of $60,000 on January