Starling Corporation has accumulated E & P of $60,000 on January 1, 2012.In 2012, Starling Corporation had an operating loss of $80,000.It distributed cash of $40,000 to Zoe, its sole shareholder, on December 31, 2012.Starling Corporation's balance in its E & P account as of January 1, 2013, is:

Question

Quizplus · Accepted Answer

The operating loss of $80,000 reduces the E&P balance to $-20,000 ($60,000 - $80,000). The distribution of $40,000 to the sole shareholder further reduces the E&P balance to $-60,000 ($-20,000 - $40,000). Therefore, the balance in the E&P account as of January 1, 2013, is a $20,000 deficit.

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