Ajax Computer Company Is an Accrual-Method Calendar-Year Taxpayer

question 26

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 $1.6 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 $1,100,000 for a one-time advertising blitz during a professional golf tournament in April of next year. What amount of these payments, if any, can Ajax deduct this year?

• A) $1.60 million
• B) $1.10 million
• C) $2.70 million
• D) $2.70 million only if the professional golf tournament is played before April 15
• E) No deduction can be claimed this year

---

Definitions:

Axillary Crutches

Mobility aids used to transfer weight from the legs to the upper body, typically positioned under the armpits.

Supplies Account

An account used to track the cost of consumable items and minor equipment used within a business operation.

Adjustment

An alteration made to financial records or statements to correct errors or account for changes.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns to ensure that a company's financial transactions are correctly recorded.