Which of the Following Statements Best Describes the Role of Current

question 93

Multiple Choice

Which of the following statements best describes the role of current and accumulated E&P in determining if a distribution is a dividend?

• A)A distribution will only be a dividend if net E&P (current plus accumulated)is positive at the time of the distribution.
• B)A distribution can never be a dividend if current E&P is negative.
• C)At a minimum, some portion of the distribution will be a dividend if current E&P for the year is positive, even if accumulated E&P is negative.
• D)A distribution will never be a dividend if current E&P for the year is negative, even if accumulated E&P is positive.

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Definitions:

Present Obligation

A duty or responsibility that exists at the reporting date, typically requiring an outflow of resources.

Contingent Liability

A potential financial obligation that may occur in the future depending on the outcome of a specific event, not confirmed to exist or be measurable until one or more conditions are fulfilled.

Liability

A financial obligation or debt owed by an individual or company.

Accrual

The accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.