Problem 6-38 (LO. 2) Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2024. Gross receipts were $300,000. The following expenses were incurred and paid as indicated: Expense Rental of coliseum Payment Date $25,000 December 21, 2024 Cost of goods sold: Food 30,000 December 30, 2024 Souvenirs Performers Cleaning the coliseum 60,000 December 30, 2024 100,000 January 5, 2025 10,000 February 1, 2025 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, 2025. a. Calculate Duck's net income from the concert for tax purposes for 2024. If an amount is zero, enter "0". Gross receipts Less: Coliseum rental Food Souvenirs Performers Cleaning costs Total expenses Net income for 2024 b. What is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2025? Assume a 5% discount rate and a 21% marginal tax rate in 2024 and 2025. The present value factor for a single sum at 5% for one year is 0.9524. If required, round your answers to the nearest dollar. The present value of the 2025 tax savings is and the cost of the deferral to Duck is $
Problem 6-38 (LO. 2) Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2024. Gross receipts were $300,000. The following expenses were incurred and paid as indicated: Expense Rental of coliseum Payment Date $25,000 December 21, 2024 Cost of goods sold: Food 30,000 December 30, 2024 Souvenirs Performers Cleaning the coliseum 60,000 December 30, 2024 100,000 January 5, 2025 10,000 February 1, 2025 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, 2025. a. Calculate Duck's net income from the concert for tax purposes for 2024. If an amount is zero, enter "0". Gross receipts Less: Coliseum rental Food Souvenirs Performers Cleaning costs Total expenses Net income for 2024 b. What is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2025? Assume a 5% discount rate and a 21% marginal tax rate in 2024 and 2025. The present value factor for a single sum at 5% for one year is 0.9524. If required, round your answers to the nearest dollar. The present value of the 2025 tax savings is and the cost of the deferral to Duck is $
Chapter6: Deductions And Losses: In General
Section: Chapter Questions
Problem 38P
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Transcribed Image Text:Problem 6-38 (LO. 2)
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2024. Gross receipts were $300,000. The following
expenses were incurred and paid as indicated:
Expense
Rental of coliseum
Payment Date
$25,000
December 21, 2024
Cost of goods sold:
Food
30,000
December 30, 2024
Souvenirs
Performers
Cleaning the coliseum
60,000
December 30, 2024
100,000
January 5, 2025
10,000
February 1, 2025
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, 2025.
a. Calculate Duck's net income from the concert for tax purposes for 2024.
If an amount is zero, enter "0".
Gross receipts
Less:
Coliseum rental
Food
Souvenirs
Performers
Cleaning costs
Total expenses
Net income for 2024
b. What is the true cost to Duck if it had to defer the $100,000 deduction for the performers until 2025? Assume a 5% discount rate and a
21% marginal tax rate in 2024 and 2025. The present value factor for a single sum at 5% for one year is 0.9524.
If required, round your answers to the nearest dollar.
The present value of the 2025 tax savings is
and the cost of the deferral to Duck is $
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