is corporation, sponsored a rock concert on December 29, 2018. Gross receipts we

Question

is corporation, sponsored a rock concert on December 29, 2018. Gross receipts were $300,000. The following expenses were incurred and paid as indicated: Expense Rental of coliseum Cost of goods sold: Payment Date December 21, 2018 $25,000 Food 30,000 60,000 100,000 $10,000 December 30, 2018 December 30, 2018 January 5, 2019 February 1, 2019 Souvenirs Performers Cleaning the coliseum Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 8-10, 2019. a. Calculate Duck's net income from the concert for tax purposes for 2018. If an amount is zero, enter "0. Gross receipts Less: 9500 Coliseum rental Food Souvenirs Performers 60,000 Co Cleaning costs Total expenses Net income for 2018 15000 b. what is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2019? Assume a S% discount rate and a 21% marginal tax rate in 2018 and 2019. The present value factor for a single s year is 0.9524. m at S% for one and the cost of the deferral to Duck is $ The present value of the 2019 tax savings is

Explanation / Answer

$100000 deferred for 2019 and Present Value Factor is 0.9524

So, $100000 will be equal to 100000/0.9524 = 104998

The Present Value of Tax Savings is $ 104998+$10000 (expense for cleaning the colisium)

The Cost of deferral to duck is $ 104998 (as calculated above)

Less: Actual Cost $ 100000

= $4998

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