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. Johnstones earnings and profits at the end of year 1 were $12,210. Marcus is Johnstones sole shareholder, and he has a stock basis of $48,500 at the end of year 1.

Johnstone Corporation
Income Statement
December 31, Year 2
	Year 2
	(S Corporation)
Sales revenue	$	184,000
Cost of goods sold		(43,500	)
Salary to owners		(68,500	)
Employee wages		(59,000	)
Depreciation expense		(12,500	)
Miscellaneous expenses		(4,850	)
Interest income		13,390
Overall net income	$	9,040

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? (Leave no answer blank. Enter zero if applicable.)

1. Johnstone distributed $27,700 to Marcus in year 2.

a. Accumulated adjustments account

b.Dividend income