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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12035
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I HAVE A FINAL YEAR S-CORP WITH ABOUT $7k IN CURRENT LIABILITIES,

Customer Question

I HAVE A FINAL YEAR S-CORP WITH ABOUT $7k IN CURRENT LIABILITIES, $75k IN APIC, AND $82 IN NEGATIVE RETAINED EARNINGS. THE AAA ACCOUNT AGREES TO THE NEGATIVE R/E. FOLLOWING YOUR ADVICE ON CLOSING THE LIABILITIES TO THE AAA ACCOUNT AS A NEGATIVE DISTRIBUTION, I'M LEFT WITH AN EQUAL AMOUNT OF APIC AND NEGATIVE R/E. HOW DO I CLOSE THESE TWO ACCTS TO BE ZERO AT THE END?
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
If the current yr Net Income reported as a separate line in the stockholders' equity or in the OEsection of the balance sheeta negative amount of net income must be reported. The negative net income occurs when the current year's revenuesre less than the current year's expensesIf the cumulative earnings minus the cumulative dividends declared result in a negative amount, there will be a negative amount of RE.This negative amount of retained earnings will be reported as a separate line within stockholders' equity.If the amount of negative retained earnings is greater than the amount of paid-in capital, the total of the stockholders' equity section will also be a negative amount.To recap, negative amounts can occur and the negative amounts must be reported.