2. A local McDonald's is operated as a franchise (treated as a separate taxable entity from...

 

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2. A local McDonald's is operated as a franchise (treated as a separate taxable entity from McDonald's Corporation as a whole). During 2018, the local franchise had S300,000 in cash sales and the following cash expenditures: Rental cost of restaurant venue (52,000 per month, starting March. 1, 2018) Franchise fee for 2018 (fully dedactible) Compensation for 2018 Utilities for 2018 $24,000 S30,000 S53,000 $9,500 In addition to the above, the owner contracted with a supplier to provide all the cleaning supplies for the location over a 12 month period starting on March 1, 2018. The owner paid $6,000 (the total cost for the contract) on April 1, 2018, and the same amount of supplies was brought in from the supplier each month. Finally, the owner paid the MeDonald's Corporation a royalty fee at 6% of store sales for the 2018 year on December 30, 2018. a. (8 points) Assuming the local MeDonald's operates on a calendar year-end under the assrual method, what amoust of net profit (loss) for the business was included in AGI for 2018? b. (8 points) Assuming the local MeDonald's operates on a calendar year-end under the cash method, what amount of net profit (loss) for the business was included in AGI for 2018? 2. A local McDonald's is operated as a franchise (treated as a separate taxable entity from McDonald's Corporation as a whole). During 2018, the local franchise had S300,000 in cash sales and the following cash expenditures: Rental cost of restaurant venue (52,000 per month, starting March. 1, 2018) Franchise fee for 2018 (fully dedactible) Compensation for 2018 Utilities for 2018 $24,000 S30,000 S53,000 $9,500 In addition to the above, the owner contracted with a supplier to provide all the cleaning supplies for the location over a 12 month period starting on March 1, 2018. The owner paid $6,000 (the total cost for the contract) on April 1, 2018, and the same amount of supplies was brought in from the supplier each month. Finally, the owner paid the MeDonald's Corporation a royalty fee at 6% of store sales for the 2018 year on December 30, 2018. a. (8 points) Assuming the local MeDonald's operates on a calendar year-end under the assrual method, what amoust of net profit (loss) for the business was included in AGI for 2018? b. (8 points) Assuming the local MeDonald's operates on a calendar year-end under the cash method, what amount of net profit (loss) for the business was included in AGI for 2018?

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Calculation of Profit a Accrual Method b Cash Met... View the full answer