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Unformatted text preview: income CPA-01807 Type1 M/C 3. CPA-01807 ARE R03 #5 A-D $36,000
(4,000) Corr Ans: B $4,500
(3,500) PM#3 (2,000)
$38,500 R 3-01 Page 34 At the beginning of the year, Westwind, a C corporation, had a deficit of $45,000 in accumulated earnings
and profits. For the current year, Westwind reported earnings and profits of $15,000. Westwind
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Becker CPA Review, PassMaster Questions
Lecture: Regulation 3 distributed $12,000 during the year. What was the amount of Westwind's accumulated earnings and
profits at year-end?
Choice "b" is correct. Accumulated earnings and profits include all prior and current year earnings and
profits at year-end. The key here is recognizing that the beginning accumulated earnings and profits is a
deficit. Thus the calculation would be as follows:
Beginning deficit in Accumulated E&P
Plus: Current year E&P
Less: Amounts distributed
End of year Accumulated E&P ($45,000)
($42,000) Note: The examiners did not ask whether or not the accumulated earnings and profits at year-end was a
deficit, rather th...
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