Aztec Company reports current E&P of $200,000 in year 1 and accumulated E&P at the beginning of the year of negative $100,000.Aztec distributed $300,000 to its sole shareholder on January 1, year 1.How much of the distribution is treated as a dividend in year 1?
A)$300,000.
B)$200,000.
C)$100,000.
D)$0.

Question

Quizplus · Accepted Answer

A distribution is treated as a dividend to the extent of current and accumulated E&P. Here, the current E&P is $200,000, and the accumulated E&P is negative, so only $200,000 of the distribution is treated as a dividend.

Aztec Company Reports Current E&P of $200,000 in Year 1