Ron and Tom Are Equal Owners in Robin Corporation

question 34

Multiple Choice

Ron and Tom are equal owners in Robin Corporation. On July 1, 2012, each loans the corporation $20,000 at annual interest of 10%. Ron and Tom are brothers. Both shareholders are on the cash method of accounting, while Robin Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2013, Robin repays the loans of $40,000 together with the specified interest of $4,000. How much of the interest can Robin Corporation deduct in 2012?

• A)$0.
• B)$1,000.
• C)$2,000.
• D)$4,000.
• E)None of the above.

---

Definitions:

Social Policies

Strategies, principles, and actions that aim to improve the welfare and quality of life of the population, often through governmental intervention.

Welfare Reform

Legislative changes intended to improve the efficiency and effectiveness of welfare systems, often by promoting work capability among beneficiaries and reducing dependency.

Personal Responsibility Act

A legislative measure aimed at encouraging individuals to take responsibility for their actions, often in the context of welfare reform or healthcare legislation.

Social Security

A government program that provides financial assistance to people with inadequate or no income, especially the elderly and disabled.