Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. corporation z has an accumulated deficit of $100 i

Corporation Z has an accumulated deficit of $100 in E&P as of December 31 of...

80.2K

Verified Solution

Question

Accounting

Corporation Z has an accumulated deficit of $100 in E&P as of December 31 of the preceding year. In addition, corporation Z is operating at a loss for the current year. Z has a valuable asset which if sold will generate a gain sufficient to eliminate the current years deficit in E&P and cause there to be positive earnings and profits. Rather than sell the asset in the current year and distribute the proceeds to shareholders as a dividend, Z borrows against the asset and distributes the loan funds to the shareholders. In the following year, Z sells the asset and pays off the loan.

a.

There is a dividend in the current year because the borrowing and the delaying of the sale is a sham.

b. The distribution will be a return of capital and potential gain to shareholders.

c. a and b.

d. None of the above.

***Explain how you got that answer?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Statistics
1.2K views

Find the indicated Probability. A bank’s loan office uses credit scores in their application process. The credit...

Statistics
1.2K views

Height vs Weight - Erroneous Data: You will need to use software to answer these questions. Below...

Medical Sciences
1.2K views

At sea level, from rest to exercising at a oxygen consumption of 2 liters / min,...

Physics
1.2K views

a person throes a vall upward ibti the air from a roof railing with an initial...

Psychology
1.2K views

Why would it be important for an undergraduate psychology student to work in a Developmental psychology laboratory...

Physics
1.2K views

A horizontal block-spring system with the block on a frictionless surface has total mechanical energy E...

Biology
1.2K views

Consider the phylogeny of Arthropods below when answering the following three questions worm marine Shrimp...

Algebra
1.2K views

Write the English phrase as an algebraic expression Let x represent the number Eight less...

Accounting
1.2K views

An example of a cost likely to have a fixed behavior pattern is: a) sales...

Accounting
1.2K views

answer questions1-5 1. Assess the ethics of buying-in on...

Accounting
1.2K views

Sharpe Knife Company expects sales next year to be $1,530,000 if the economy is strong,...

Accounting
1.2K views

HANSACTION ANALYSIS Amigo Plastics has been in operation for three years. Below find description of...