Question

Wildcat Corporation reports a deficit in current E&P of ($200,000) in 20X3 and accumulated E&P at the beginning of the year of $100,000. Wildcat distributed $300,000 to its sole shareholder on December 31, 20X3. How much of the distribution is treated as a dividend in 20X3?

Answer 1

Zero or $0

Step-by-step explanation:

Distribution is the company payment to its stockholders in the form of cash , stock, physical product. It is further defined as the allocation of income and capital in a specific time period.

Beginning Accumulated E&P = $100,000

E&P in the year = ($200,000)

By adding the beginning & current year E&P we will have the accumulated E&P in the year.

Accumulated E&P = $100,000 + ($200,000) = ($100,000)

As the accumulated E&P is negative so, the Wildcat distribution will not be classified as dividend payment.

Zero distribution is treated as a dividend in 20x3.