Simon, a C corporation, had a deficit in accumulated earnings and profits of $50,000 at the beginning of the year and had current earnings and profits of $10,000. At year end, Simon paid a dividend of $15,000 to its sole shareholder. What amount of the dividend is reported as income? a. $0 b. $5,000 c. $10,000 d. $15,000

Question

Business

Quincy

23 July, 12:52

Simon, a C corporation, had a deficit in accumulated earnings and profits of $50,000 at the beginning of the year and had current earnings and profits of $10,000. At year end, Simon paid a dividend of $15,000 to its sole shareholder. What amount of the dividend is reported as income? a. $0 b. $5,000 c. $10,000 d. $15,000

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Answers (2)

Know the Answer?

Sofia Horn · Answer 1

c. $10,000

Explanation:

Dividends are distributed out of the its earnings and profits and hence if current earnings and profits is positive and accumulated earnings and profits is negative, dividends can be distributed only to the extent of current earnings and profits.

Bryson Bradford · Answer 2

Answer: The answer is $10,000

Explanation:

Dividend is the portion of a business earnings or reserves that is paid to shareholders. This is usually paid on a yearly basis.

When dividends are paid it first comes out of the current earnings (in this case $10,000).

The excess of the dividend payment (that is $5,000) will be reduced from the sole shareholder's stock in the company, since he is the sole owner of the company.