Choices a c and d are incorrect per the above rule

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Unformatted text preview: The IRS has the authority to require that a taxpayer use a method of accounting to accurately reflect the proper income and expenses. Personal Service Corporations are permitted the use of the cash method. Choices "a", "c", and "d" are incorrect, per the above rule. CPA-02017 Type1 M/C 9. CPA-02017 ARE R01 #3 A-D Corr Ans: C PM#9 R 3-01 Page 39 On January 1, 1999, Locke Corp., an accrual-basis, calendar-year C corporation, had $30,000 in accumulated earnings and profits. For 1999, Locke had current earnings and profits of $20,000, and made two $40,000 cash distributions to its shareholders, one in April and one in September of 1999. What amount of the 1999 distributions is classified as dividend income to Locke's shareholders? a. b. c. d. $0 $20,000 $50,000 $80,000 CPA-02017 Explanation Choice "c" is correct. Dividends are distributions of a corporation's earnings & profits, including accumulated (prior year) and current year E&P. Because the corporation had both accumulated E&P of $30,000 and cu...
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.

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