Question & Answer: Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2017. Gross receipts were $300,000. The follo…..

Peggys deductible losses d theft loss of $1,500 on 900 her uninsured business use car. Calculate Duck, an accrual basis corporation, sponsored a rock concert on 29, 2017. Gross receipts were $300,000. The following expe incurred and paid as indicated: Expense Rental of coliseum Cost of goods sold: We Payment Date 25,000 December 21, 2017 Food Souvenirs 30,000 60,000 100,000 10,000 December 30, 2017 December 30, 2017 January 5, 2018 February 1, 2018 Performers Cleaning of coliseum Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 8-10, 2018. a. Calculate Ducks net income from the concert for tax purposes for 2017. b. Using the present value tables in Appendix G, what is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2018? Assume a 5% discount rate and a 25% marginal rate in 2017 and 2018. 103 Doug incurred and paid the following expenses during the year d light while he was commuting to work.

Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2017. Gross receipts were $300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 8-10, 2018. a. Calculate Duck’s net income from the concert for tax purposes for 2017. b. Using the present value tables in Appendix G, what is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2018? Assume a 5% discount rate and a 25% marginal rate in 2017 and 2018.

Expert Answer

Solution:

a) Calculation of the Duck’s Net Income From the Concern for Tax Purposes for 2017:

Gross receipts		$300,000
Less:
Coliseum rental	$25,000
Food (cost of goods sold)	$30,000
Souvenirs (cost of goods sold)	$60,000
Performers	$100,000	($215,000)
Net income for 2017		$85,000

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