ter Company is an accrual method calendar year taxpayer. Ajax has never advertis
ID: 2556416 • Letter: T
Question
ter 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 $1.5 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 $1000,000 f advertising time during a professional golf tournament which will occur once in April of next year. What amount of these payments if any, can Ajax deduct this year? Multiple Choice $1.50 million. No deduction can be claimed this year $2.50 million. $1,000,000.Explanation / Answer
When you spend money on an advertising and promotion expense, you need to create a general ledger entry. Recording how much you spend on business promotion expenses can help you stay within your annual advertising budget, know where your money is going, and stay compliant with the IRS.
If you use double-entry accounting, you must record your advertising expense when you receive an invoice. And, you need to make a separate entry when you pay the invoice.
Advertising costs are considered miscellaneous expenses if they are ordinary and reasonable. Your advertising expenses must be directly related to your business
You can deduct promotion costs if they relate to your company, and you expect to gain business from them in the future. For example, you can deduct the cost of sponsoring an event.
Ajax can deduct whole amount of money spent this year in his deductions irrespective of the fact that the events are to take place next year.So,$2.5 million can be claimed this year as advertising expenses.
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