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 at the end of the year will be treated as a dividend because total earnings and profits is a positive $100,000.

Question

Quizplus · Accepted Answer

This is because a dividend must come from the company's current or accumulated earnings and profits. In this case, the distribution will come from accumulated earnings and profits which are positive, making it a dividend.

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