Lawrence Corporation Reports the Following Results During the Current Year

question 86

Essay

Lawrence Corporation reports the following results during the current year:
$\begin{array}{ll}\text { Taxable income } & \$ 500,000 \\\text { Federal income taxes } & 170,000 \\\text { Dividends paid: June 5 } & 50,000 \\\text { Accumulated E\&P balance: January 1 } & 800,000\end{array}$ No dividends were paid in the throwback period. A long-term capital gain of $50,000 is included in taxable income. The statutory accumulated earnings tax exemption has been used up in prior years. An additional earnings accumulation of $60,000 for the current year can be justified as meeting the reasonable needs of the business. What is Lawrence Corporation's accumulated earnings tax liability?

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Definitions:

Perfectly Competitive

A market structure where there are many buyers and sellers, all selling identical products, and no single entity can influence the market price.

Market Power

The ability of a firm or group of firms to control prices and output levels in a market.

Price Elastic

Describes a situation where the quantity demanded or supplied of a good changes significantly due to changes in its price.

Monopoly

Monopoly is a market structure characterized by a single seller selling a unique product in the market, facing no competition.