Good Times Corporation Has a $60,000 Accumulated E&P Balance at the Beginning

question 98

Multiple Choice

Good Times Corporation has a $60,000 accumulated E&P balance at the beginning of the year and incurs a $100,000 deficit during the year. Because of its poor operating performance, Good Times pays only three of its usual $10,000 quarterly dividend payments to its sole shareholder: those ordinarily paid March 31, June 30, and September 30. How are the March 31, June 30, and September 30 payments of $10,000 treated?

• A)dividend; dividend; return of capital
• B)dividend; return of capital; return of capital
• C)return of capital; dividend; dividend
• D)return of capital; return of capital; dividend

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Definitions:

Investment

The process of distributing funds with the aim of earning an income or a profit.

Future Value

The value of an investment at a specified date in the future, factoring in variables like capital growth and interest rates.

Compounding

The process whereby interest is credited to an existing principal amount as well as to interest already paid, leading to exponential growth over time.

Investment

The allocation of resources (such as capital) to assets with the expectation of generating future profit or income.