Question

Amit, Inc., an S corporation, holds an AAA balance of 614,000 at the beginning of the tax year. During the year, the following items occur.

Operating income501,000
Interest income 6,500
Dividend income 13,020
Municipal bond interest income 6,000
Long-term capital loss from sale of investment land 7,400
Section 179 depreciation deduction 6,000
Charitable contributions 19,000
Cash distributions 57,000

Amit's ending AAA balance is:
1) 1,242,150
2) 1,055,620
3) 1,191,150
4) 1,185,150
5) Some other amount

Answer 1

The ending Accumulated Adjustments Account (AAA) balance for Amit, Inc. is calculated by adjusting the beginning balance with various income and expense items, leading to the correct option of $1,055,620.

option 2. 1,055,620 is correct option.

Step-by-step explanation:

The student is inquiring about the calculation of Amit, Inc.'s Accumulated Adjustments Account (AAA) balance. To calculate the ending AAA balance, we start with the beginning balance and adjust for the income and deductions that occurred throughout the year. We add operating income ($501,000), interest income ($6,500), and dividend income ($13,020). Municipal bond interest income ($6,000) is tax-exempt and does not affect the AAA. The long-term capital loss ($7,400) is deducted, as are the Section 179 depreciation deduction ($6,000), and charitable contributions ($19,000). Cash distributions do not affect the AAA balance.

Adding and subtracting these amounts from the beginning balance, we get an ending AAA balance of $1,055,620 (correct option in final answer).