Cruz Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted. B uses a three-factor apportionment formula under which sales are double-weighted. C employs a single-factor apportionment factor, based solely on sales. Cruz's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows.
Cruz's apportionable income assigned to C is:

Question

Cruz Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted. B uses a three-factor apportionment formula under which sales are double-weighted. C employs a single-factor apportionment factor, based solely on sales. Cruz's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows.
 Cruz's apportionable income assigned to C is:

Quizplus · Accepted Answer

State C employs a single-factor apportionment formula based solely on sales. Therefore, Cruz Corporation’s apportionable income assigned to State C would be ($500,000 / $1,500,000) * $1,000,000 = $333,333. However, since property and payroll factors are not considered for apportionment in State C, we must exclude them from the denominator as well. Therefore, the correct allocation to State C would be ($500,000 / $500,000) * $333,333 = $333,333. However since we are looking for the amount assigned to State C only, we need to exclude the apportioned income allocated to State A and State B and, thus, Cruz's apportionable income assigned to State C is $333,333 - $200,000 - $133,333 = $0. Therefore, the correct answer is C.

Cruz Corporation Owns Manufacturing Facilities in States A, B, and C