Question

Aztec Company reports current E&P of $200,000 in 20X3 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, 20X3. How much of the distribution is treated as a dividend in 20X3?

Answer 1

$200,000

Step-by-step explanation:

The dividends are determined by the current earnings and profits (E&P) of a company. In this case, Aztec Company's E&P for 20x3 will determine the maximum amount of dividends it can distribute.

Since Aztec's E&P for 20x3 was $200,000, then the maximum amount of dividends it can distribute in 20x3 is $200,000.