Barry and Larry,who Are Brothers,are Equal Owners in Chickadee Corporation

Multiple Choice

Barry and Larry,who are brothers,are equal owners in Chickadee Corporation.On July 1,2016,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 30,2017,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 2016?

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