Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $12,080. Marcus is Johnstone's sole shareholder, and he has a stock basis of $48,000 at the end of year 1.

Johnstone Corporation Income Statement December 31, Year 2

Sales revenue $182,000

Cost of goods sold (43,000)

Salary to owners (68,000)

Employee wages (58,500)

Depreciation expense (12,000)

Miscellaneous expenses (4,800)

Interest income 13,220

Overall net income $ 8,920

What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios?

a. Johnstone distributed $7,600 to Marcus in year 2.

b. Johnstone distributed $11,600 to Marcus in year 2.

c. Johnstone distributed $17,600 to Marcus in year 2.

d. Johnstone distributed $27,600 to Marcus in year 2.