Lone Star Company is a calendar-year corporation, and this year Lone Star reported $100,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $12,000. At the beginning of the year, Lone Star's sole shareholder was Matt. Lone Star declared $30,000 in cash distributions on each of the following dates: March 31, June 30, September 30, and December 31. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. a. How much of the $120,000 in total distributions will be treated as dividends? b. Suppose that Matt sold half of the shares to Chris on June 1 for $40,000. How much dividend income will Matt recognize this year? Answer is complete but not entirely correct. Dividend recognized $ 35,714 X c. If Matt's basis in the Lone Star shares was $7,000 at the beginning of the year, how much capital gain will he recognize on the sale and distributions from Lone Star? Capital gain recognized on the sale and distribution

Lone Star Company is a calendar-year corporation, and this year Lone Star reported $100,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $12,000. At the beginning of the year, Lone Star's sole shareholder was Matt. Lone Star declared $30,000 in cash distributions on each of the following dates: March 31, June 30, September 30, and December 31. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. a. How much of the $120,000 in total distributions will be treated as dividends? b. Suppose that Matt sold half of the shares to Chris on June 1 for $40,000. How much dividend income will Matt recognize this year? Answer is complete but not entirely correct. Dividend recognized $ 35,714 X c. If Matt's basis in the Lone Star shares was $7,000 at the beginning of the year, how much capital gain will he recognize on the sale and distributions from Lone Star? Capital gain recognized on the sale and distribution

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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