Ajax Computer Company Is an Accrual Method Calendar Year Taxpayer

question 25

Multiple Choice

Ajax Computer Company is an accrual method calendar year taxpayer. Ajax has never advertised in the national media prior to this year. In November of this year, however, Ajax paid $1 million for television advertising time during a "super" sporting event scheduled to take place in early February of next year. In addition, in November of this year the company paid $500,000 for advertising time during a professional golftournament which will occur once in April of next year. What amount of these payments, if any, can Ajax deduct this year?

• A) $1.5 million.
• B) $500,000.
• C) $1 million.
• D) $1.5 million only if the professional golf tournament is played before April 15.
• E) No deduction can be claimed this year.

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Definitions:

Cost Driver

A factor that causes the cost of an activity or process to change.

Time Frame

The period during which an event occurs or is planned to occur, often with a specified start and end date.

Cost Data

Information related to the amounts incurred to create a product or service, used for budgeting, valuing inventory, and setting selling prices.

Cost Estimation Methods

Techniques used to predict the costs associated with the production of a product, project, or operation.