At the Beginning of the Current Year,Paul and Yong Each

question 7

Multiple Choice

At the beginning of the current year,Paul and Yong each own 50% of Sparrow Corporation.In July,Paul sold his stock to Sarah for $110,000.At the beginning of the year,Sparrow Corporation had accumulated E & P of $200,000 and its current E & P is $240,000 (prior to any distributions) .Sparrow distributed $260,000 on March 10 ($130,000 to Paul and $130,000 to Yong) and distributed another $260,000 on October 1 ($130,000 to Sarah and $130,000 to Yong) .Sarah has dividend income of:

• A)$60,000.
• B)$90,000.
• C)$110,000.
• D)$130,000.
• E)None of the above.

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Definitions:

Decreasing-cost Industry

An industry where the cost per unit of output decreases as the scale of production increases.

Long-run Equilibrium Price

The price level at which the quantity supplied equals the quantity demanded, achieved over a period where all inputs can be varied by producers.

Increase in Demand

A situation where there is a rise in consumers' desire to purchase goods or services, leading to higher quantity demanded at every price level.

Constant Costs

Occur when the cost of producing an additional unit of a good does not change as the scale of production increases or decreases.