In 2015, AS, an accrual basis corporation, contracted with a nationally prominent artist to paint a mural
Question:
In 2015, AS, an accrual basis corporation, contracted with a nationally prominent artist to paint a mural in the lobby of the new corporate headquarters under construction.
The artist’s commission was $180,000, payable on completion of the mural. The artist finished her work and received the $180,000 commission in 2017. AS has a 35 percent marginal tax rate and uses a 7 percent discount rate to compute NPV.
a. Compute AS’s after-tax cost of the commission if it can deduct the $180,000 accrued expense in 2015.
b. Compute AS’s after-tax cost of the commission if the economic performance requirement delays the deduction until 2017.
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Step by Step Answer:
Principles Of Taxation For Business And Investment Planning 2017
ISBN: 9781259753015
20th Edition
Authors: Sally M. Jones, Shelley C. Rhoades Catanach, Sandra R. Callaghan