Exercise 19-22 (Algorithmic) (LO. 3) On January 1 of the current year, Rhondell

Question

Exercise 19-22 (Algorithmic) (LO. 3) On January 1 of the current year, Rhondell Corporation has accumulated E & P of $154,000. Current E & P for the year is $462,000, 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 $246,400 ($123,200 to Elizabeth and $123,200 to Jonathan) on April 30 and a total of $431,200 ($215,600 to Jonathan and $215,600 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume the shareholders have sufficient basis in their stock for any amount that is treated as return of capital. If an amount is zero, enter "O". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar. From Current From Accumulated Treated as E & P E & P Return of Capital April 30 distribution of $246,400 December 31 distribution of $431,200

Explanation / Answer

ans From Current E &P From Accumulated E & P Treated as Return of caoiutal April 30 distribution of $246400 $168,000 $78,400 $0 246400/677600*462000 (246400-168000) December 31 distribution of $431200 $294,000 $75,600 61600 431200/677600*462000 (154000-78400) (431200-294000-75600) (remaining of accumulated earnings) From Accumulated E & P $154,000 Current E &P 462000 Total $616,000 Distriution (246400+431200) 677600 So 677600-616000 has to be taken care of $61,600

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