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

question 112

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 $1.7 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 $1,200,000 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)$1.70 million
• B)$1.20 million
• C)$2.90 million
• D)$2.90 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:

Lobe-Finned Fish

Jawed fish with fins supported by internal bones; for example, a coelacanth or lungfish.

Homo Habilis

An extinct species of early human that lived approximately 2.1 to 1.5 million years ago, recognized for its use of stone tools.

Stone Tools

Prehistoric tools made from stone by early humans for cutting, scraping, and other activities.

Bipedal

The ability to walk on two legs, a key characteristic that differentiates humans and some other species from most animals.