Question

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

Answer 1

it will be credit by 51,500

Step-by-step 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.