Callahan Corporation Recorded an Adjusting Entry Using T-Accounts as Follows $\begin{array}{cc}\text {Interest Receivable }\\\hline\begin{array}{ll|l}&75& \\\end{array}\end{array}$

question 94

Multiple Choice

Callahan Corporation recorded an adjusting entry using T-accounts as follows:
$\begin{array}{cc}\text {Interest Receivable }\\\hline\begin{array}{ll|l}&75& \\\end{array}\end{array}$
$\begin{array}{cc}\text { Interest Revenue}\\\hline\begin{array}{ll|l}&&75 \\\end{array}\end{array}$
Which of the following reflects how this adjustment affects the company's financial statements?
$\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | c | } \hline&&&&&\text { Stk. }&&&&&&\text { Stmt of }\\ &\text { Asset }&=&\text { Liab. }&+&\text { Equity }&\text { Rev. }&-&\text { Exp. }&=&\text { Net Inc. }&\text { Cash Flows }\\\hline A&+&=&+&+&NA&NA&-&NA&=&NA&+FA\\\hline B&+&=&NA&+&+&+&-&NA&=&+&NA\\\hline C&+&=&NA&+&+&+&-&NA&=&+&+OA\\\hline D&-&=&NA&+&NA&-&-&NA&=&-&NA\\\hline\end{array}$

• A) Option A
• B) Option B
• C) Option C
• D) Option D

---

Definitions:

Internal Revenue Code

The comprehensive set of tax laws in the United States, governed by the Internal Revenue Service (IRS), that dictates federal tax obligations.

Federal Income Taxes

Taxes imposed by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Corporations

Legal entities that are separate and distinct from their owners, with the ability to own assets, incur liabilities, and sell stock.

Double Taxation

A taxation principle referring to income taxes paid twice on the same source of income. This usually occurs with corporate income taxed at both the corporate level and again at the shareholder level on dividends.