Rust Corporation has accumulated E & P of $30,000 on January 1,2010.In 2010,Rust Corporation had an operating loss of $40,000.It distributed cash of $20,000 to Andre,its sole shareholder,on December 31,2010.Rust Corporation's balance in its E & P account as of January 1,2011,is:
A)$30,000 deficit.
B)$10,000 deficit.
C)$0.
D)$30,000.
E)None of the above.

Question

Quizplus · Accepted Answer

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