Maui Corporation Makes Two Distributions During the Current Tax Year-The

question 69

Multiple Choice

Maui Corporation makes two distributions during the current tax year-the first for $20,000 on February 1 and the second for $30,000 on August 1.Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits.How much of the second distribution is taxable as a dividend?

• A)$10,200
• B)$10,800
• C)$19,000
• D)$21,000

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Definitions:

Consolidated Net Income

The total profit of a parent company and its subsidiaries after taxes and interest, reflecting the group's overall financial performance.

Initial Value Method

A financial accounting approach for investments where the investment is recorded at its acquisition cost without subsequent adjustment for changes in market value.

Consolidated Balance Sheet

A financial statement that summarizes the assets, liabilities, and shareholders' equity of a parent and its subsidiaries as one single entity.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.