Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338. (Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.) Note: Negative amount should be indicated with a minus sign. Answer is not complete. Current E&P $ 120,000 Less dividends paid (100,000) Undistributed Current E&P $ 20,000 Prorated Undistributed Current E&P at 9/30 $ 15,000 Add Accumulated E&P at the beginning of year 45,000 Total Accumulated E&P at 9/30 $ 60,000 Reduce Accumulated E&P by Add current E&P in 4th quarter Accumulated E&P at beginning of next year $ 60,000

Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338. (Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.) Note: Negative amount should be indicated with a minus sign. Answer is not complete. Current E&P $ 120,000 Less dividends paid (100,000) Undistributed Current E&P $ 20,000 Prorated Undistributed Current E&P at 9/30 $ 15,000 Add Accumulated E&P at the beginning of year 45,000 Total Accumulated E&P at 9/30 $ 60,000 Reduce Accumulated E&P by Add current E&P in 4th quarter Accumulated E&P at beginning of next year $ 60,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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