Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which it holds a 10% interest. Cardinal also receives interest income of $35,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a library.) Cardinal borrowed funds to purchase the municipal bonds and pays $20,000 of interest on the loan. Excluding these three items, Cardinals taxable income is $500,000. Cardinal has $150,000 of accumulated E & P at the end of the prior year, and it paid Federal income taxes of $200,000 during the year.

• A. What is Cardinal Corporations taxable income after these three items are taken into account?

• B. What is Cardinal Corporations accumulated E & P at the start of next year?