Barry and Larry, Who Are Brothers, Are Equal Owners in Chickadee

question 93

Multiple Choice

Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2018, each loans the corporation $10,000 at an annual interest rate of 10%. Both shareholders are on the cash method of accounting, while Chickadee Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2019, Chickadee repays the loans of $20,000 together with the specified interest of $2,000. How much of the interest can Chickadee Corporation deduct in 2018?

• A) $0
• B) $500
• C) $1,000
• D) $2,000
• E) None of the above

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Definitions:

Split-Brain

A condition resulting from surgery that cuts the corpus callosum, separating the cerebral hemispheres and affecting communication between them.

Severed Cerebellum

A condition involving damage to or disconnection of the cerebellum, a part of the brain that plays a significant role in motor control and coordination.

Thalamus

The thalamus is a vital brain structure acting as a relay station for sensory information, channeling incoming data to appropriate areas of the brain for processing.

Sensory Information

Data received by the senses (sight, hearing, touch, taste, and smell), which is then interpreted by the brain to form an understanding of the world.