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2 February, 18:54

The Loophole Tax Service Inc. has accumulated earnings of $135,000 and current earnings of $60,000. If the dividends-paid deduction is $8,500 and reasonable business needs amount to $160,000, what is the accumulated earnings credit

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  1. 2 February, 19:03
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    it will be credit by 51,500

    Explanation:

    This will be calcualte with the same procedure as retained earnings:

    beginning + income - dividends = ending

    We should understand that this is done to determinate if a company is subject to the accumualted earnings tax.

    accumualed earnings 135,000

    income for the period 60,000

    dividends (8,500)

    increase: 51,500

    net 186,500

    This amount is less than the 250,000 exempt so there is not amount subject to accumulated earnings tax.
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