Question

Christopher is a cash-method, calendar-year taxpayer, and he made the following cash payments related to his business this year.

Calculate the after-tax cost of each payment assuming he has a 37 percent marginal tax rate. (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)

Problem 9-50 Part-c

c. $1,350 for office supplies in May of this year. He used half of the supplies this year and he will use the remaining half by February of next year.

Answer 1

According to the question, Christopher is a Calendar Year tax payer and he uses cash method for his accounting. This means he will recognize the expenses and income on payment and receipt basis respectively.

In this question Christopher pays 1350$ IN May month of the year for the office supplies. But he uses them in parts, half in this year and other half in next part of the year. But as he Uses Cash Method the whole amount of 1350$ will be recognized in this year only.

He has a tax rate of 37 % so his after tax cost of the expense will be 1350(1-0.37) = 850.50 $. On Paying for the expense this year he will have a tax saving of 499.50 and his cost of expense will be 850.50$ only.

Therefore, Christopher will recognize the whole expense in this year only and will Have a after tax cost of expense of 850.50$

Thank You

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