L06 Lonergan Inc a calendar year S corporation in Athens Geo

L0.6 Lonergan, Inc., a calendar year S corporation in Athens, Georgia, had a bal- ance in AAA of $200,000 and AEP of $110,000 on December 31, 2015. During 2016, Lonergan, Inc., distributes $140,000 to its shareholders, while sustaining an or- dinary loss of $120,000. Calculate the balance in Lonergan\'s AAA and AEP accounts at the end of 2016.

Solution

AAA AEP Beginning balance, 1/1/16 200000 110000 Less: Distributions -140000 0 Less: Loss (ordinary) -120000 0 Ending Balance -60000 110000 $60,000 negative balance in AAA and AEP remains at $110,000