Late in the Current Year, Jolsen Company Signed a Four-Year

question 65

Multiple Choice

Late in the current year, Jolsen Company signed a four-year contract with an advertising agency. Under the contract, Jolsen must pay $375,000 annually for the agency's services. After Jolsen signed the contract, Congress enacted legislation disallowing any deduction for advertising expense for future tax years. Jolsen underestimated the after-tax cost of the contract because of:

• A) Marginal tax rate uncertainty
• B) Financial risk
• C) Audit risk
• D) Tax law uncertainty

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Definitions:

Directly Paid

A financial transaction where payment is made directly from one party to another without intermediaries.

Public Relations

The strategy of communication designed to cultivate mutually advantageous relations between organizations and their communities.

Communication Management

The systematic planning, implementing, monitoring, and revision of all the channels of communication within an organization, and between organizations; aimed at achieving the objectives of a marketing campaign.

Publicity

The public visibility or awareness for any product, service, or organization, often achieved through media coverage without direct payment.