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:

Deontological Ethics

A moral philosophy that judges the morality of an action based on the action's adherence to a rule or rules.

Imperative

A principle or rule that is considered crucial and unavoidable in a given context.

Virtue Of Generosity

The quality of being willing to give more of something, such as money or time, than is strictly necessary or expected.

Rachels

James Rachels is known for his work in ethical philosophy, particularly regarding moral reasoning, euthanasia, and the debate over cultural relativism.