Rust Corporation has accumulated E & P of $30,000 on January 1, 2011. In 2011, Rust Corporation had an operating loss of $40,000. It distributed cash of $20,000 to Andre, its sole shareholder, on December 31, 2011. Rust Corporation's balance in its E & P account as of January 1, 2012, is:

Question

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The accumulated E&P of $30,000 is reduced by the operating loss of $40,000, resulting in a deficit of $10,000. The distribution does not affect the E&P balance as it is already in a deficit.

Rust Corporation Has Accumulated E & P of $30,000 on January