As of January 1, Cassowary Corporation Has a Deficit in Accumulated

question 50

Multiple Choice

As of January 1, Cassowary Corporation has a deficit in accumulated E & P of $100,000. For the tax year, current E & P (accrued ratably) is $240,000 (prior to any distributions) . On July 1, Cassowary Corporation distributes
$275,000 to its sole shareholder. The amount of the distribution that is a dividend is:

• A) $20,000.
• B) $140,000.
• C) $240,000.
• D) $275,000.
• E) None of these.

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Definitions:

Extra Dividends

Dividends paid in addition to the expected regular dividends during a fiscal year, often signaling strong company performance.

Common Stockholders

Investors who own common shares in a company, having rights to vote at shareholders' meetings and to receive dividends.

Compensatory Stock Option Plan

A plan that provides employees the option to purchase company stock at a discounted price as part of their compensation.