Sage Reclaimers entered into a contract with Pronghorn Demolition to manage the processing of recycled materials on Pronghorm various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Sage incurs selling commission costs of $2,180 to obtain the contract. Before performing the services, Sage also designs and builds receptacles and loading equipment that interfaces with Pronghorn demolition equipment at a cost of $25,100. These receptacles and equipment are retained by Sage and can be used for other projects. Pronghorn promises to pay a fixed fee of $12,850 per year, payable every 6 months for the services under the contract. Sage incurs the following costs: design services for the receptacles to interface with Pronghorn equipment $3,220, loading equipment controllers $6,400, and special testing and OSHA inspection fees $2,180 (some of Pronghorn projects are on government property).

Sage Reclaimers entered into a contract with Pronghorn Demolition to manage the processing of recycled materials on Pronghorm various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Sage incurs selling commission costs of $2,180 to obtain the contract. Before performing the services, Sage also designs and builds receptacles and loading equipment that interfaces with Pronghorn demolition equipment at a cost of $25,100. These receptacles and equipment are retained by Sage and can be used for other projects. Pronghorn promises to pay a fixed fee of $12,850 per year, payable every 6 months for the services under the contract. Sage incurs the following costs: design services for the receptacles to interface with Pronghorn equipment $3,220, loading equipment controllers $6,400, and special testing and OSHA inspection fees $2,180 (some of Pronghorn projects are on government property).

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 60P: Ostrich Company makes gasoline storage tanks. Everything produced is under contract (that is, the...

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