Exercise 5-16 (Algorithmic) (LO. 3) On January 1 of the current year, Rhondell Corporation has accumulated E & P of $96,000. Current E & P for the year is $288,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $153,600 ($76,800 to Elizabeth and $76,800 to Jonathan) on April 30 and a total of $268,800 ($134,400 to Jonathan and $134,400 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital. If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar. April 30 distribution of $153,600 December 31 distribution of $268,800 Feedback Check My Work From Current E & P 96,000 X 192,000 X From Accumulated E & P 57,600 X 38,400 X Treated as Return of Capital 0 ✓ $ 38,400 Accumulated E & P is the total of all previous years' current E & P (since February 28, 1913) reduced by distributions made from E & P in previous years. It is important to distinguish between current E & P and accumulated E & P because the taxability of corporate distributions depends on
Exercise 5-16 (Algorithmic) (LO. 3) On January 1 of the current year, Rhondell Corporation has accumulated E & P of $96,000. Current E & P for the year is $288,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $153,600 ($76,800 to Elizabeth and $76,800 to Jonathan) on April 30 and a total of $268,800 ($134,400 to Jonathan and $134,400 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital. If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar. April 30 distribution of $153,600 December 31 distribution of $268,800 Feedback Check My Work From Current E & P 96,000 X 192,000 X From Accumulated E & P 57,600 X 38,400 X Treated as Return of Capital 0 ✓ $ 38,400 Accumulated E & P is the total of all previous years' current E & P (since February 28, 1913) reduced by distributions made from E & P in previous years. It is important to distinguish between current E & P and accumulated E & P because the taxability of corporate distributions depends on
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 5-16 (Algorithmic) (LO. 3)
On January 1 of the current year, Rhondell Corporation has accumulated E & P of $96,000. Current E & P for the year is $288,000, earned
evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth
sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $153,600 ($76,800 to
Elizabeth and $76,800 to Jonathan) on April 30 and a total of $268,800 ($134,400 to Jonathan and $134,400 Marshall) on December 31.
Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their
stock for any amount that is treated as return of capital.
If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations.
Round final answers to the nearest dollar.
April 30 distribution of $153,600
December 31 distribution of $268,800
Feedback
Check My Work
From Current
E & P
From Accumulated
E & P
96,000 X $
192,000 X $
57,600 X
38,400 X
Treated as
Return of Capital
38,400
Accumulated E & P is the total of all previous years' current E & P (since February 28, 1913) reduced by distributions made from E & P in previous
years. It is important to distinguish between current E & P and accumulated E & P because the taxability of corporate distributions depends on
how these two accounts are allocated to each distribution made during the year.
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