1. Earwood Corporation, a calendar year taxpayer, receives dividend income of $140,000 from a corporation in which it holds a 35% interest. Earwood also receives interest income of $15,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a park.) Earwood borrowed funds to purchase the municipal bonds and pays $12,000 of interest on the loan. Excluding these items, Earwood's taxable income is $320,000. Earwood has $90,000 of accumulated E & P at the end of the prior year and it paid Federal income taxes of $98,250 during the year.

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   a. After these items are taken into account, Earwood Corporation's taxable income is $_____

   b. If its beginning balance this year in accumulated E & P is $90,000, then Earwood Corporation's accumulated E & P at the start of next year is $_____

The answer is not 362,000 or 340,000.