Valdez Corporation, a calendar year taxpayer, owns property in States M and O. Both states require that the average value of assets be included in the property factor. State M requires that the property be valued at its historical cost, and State O requires that the property be included in the property factor at its net depreciated book value. $\text { Account Balances at Beginning of Year }$
$\begin{array}{lrrr}
& \text { State } M & \text { State } O & \text { Totals } \
\text { Inventories } & \$ 200,000 & \$ 300,000 & \$ 500,000 \
\text { Building \& machinery (cost) } & 700,000 & 300,000 & 1,000,000 \
\text { Accumulated depreciation } & (150,000) & (50,000) & (200,000) \
\text { Land } & \underline{400,000} & \underline{200,000} & \underline{600,000} \
\text { Totals } & \$ 1,150,000 & \$ 750,000 & \$ 1,900,000
\end{array}$

$\text { Account Balances at Year-End }$
$\begin{array}{lrrr}
& \text { State } M & \text { State } O & \text { Totals } \
\text { Inventories } & \$ 400,000 & \$ 100,000 & \$ 500,000 \
\text { Building \& machinery (cost) } & 800,000 & 500,000 & 1,300,000 \
\text { Accumulated depreciation } & (300,000) & (100,000) & (400,000) \
\text { Land } & \underline{400,000} & \underline{200,000} & \underline{600,000} \
\text { Totals } & \$ 1,300,000 & \$ 700,000 & \$ 2,000,000
\end{array}$ Valdez's O property factor is:

Question

Valdez Corporation, a calendar year taxpayer, owns property in States M and O. Both states require that the average value of assets be included in the property factor. State M requires that the property be valued at its historical cost, and State O requires that the property be included in the property factor at its net depreciated book value. $\text { Account Balances at Beginning of Year }$
$\begin{array}{lrrr} 
& \text { State } M & \text { State } O & \text { Totals } \
\text { Inventories } & \$ 200,000 & \$ 300,000 & \$ 500,000 \
\text { Building \& machinery (cost) } & 700,000 & 300,000 & 1,000,000 \
\text { Accumulated depreciation } & (150,000) & (50,000) & (200,000) \
\text { Land } & \underline{400,000} & \underline{200,000} & \underline{600,000} \
\text { Totals } & \$ 1,150,000 & \$ 750,000 & \$ 1,900,000
\end{array}$

$\text { Account Balances at Year-End }$
$\begin{array}{lrrr} 
& \text { State } M & \text { State } O & \text { Totals } \
\text { Inventories } & \$ 400,000 & \$ 100,000 & \$ 500,000 \
\text { Building \& machinery (cost) } & 800,000 & 500,000 & 1,300,000 \
\text { Accumulated depreciation } & (300,000) & (100,000) & (400,000) \
\text { Land } & \underline{400,000} & \underline{200,000} & \underline{600,000} \
\text { Totals } & \$ 1,300,000 & \$ 700,000 & \$ 2,000,000
\end{array}$ Valdez's O property factor is:

Quizplus · Accepted Answer

To calculate the O property factor for Valdez Corporation, we need to consider the net depreciated book value of the assets in State O, as required by State O's regulations. The net depreciated book value is calculated by subtracting accumulated depreciation from the cost of building and machinery, and adding inventories and land values. For State O, at the beginning of the year:- Building & machinery (cost): $300,000- Accumulated depreciation: $(50,000)- Inventories: $300,000- Land: $200,000Net depreciated book value at the beginning of the year = $(300,000 - 50,000) + 300,000 + 200,000 = $750,000At the end of the year:- Building & machinery (cost): $500,000- Accumulated depreciation: $(100,000)- Inventories: $100,000- Land: $200,000Net depreciated book value at the end of the year = $(500,000 - 100,000) + 100,000 + 200,000 = $700,000Average net depreciated book value for State O = $(750,000 + 700,000) / 2 = $725,000Total average net depreciated book value for both states (using the same method of calculation for State M and adding them together):For State M, at the beginning of the year:- Building & machinery (cost): $700,000- Accumulated depreciation: $(150,000)- Inventories: $200,000- Land: $400,000Net depreciated book value at the beginning of the year = $(700,000 - 150,000) + 200,000 + 400,000 = $1,150,000At the end of the year:- Building & machinery (cost): $800,000- Accumulated depreciation: $(300,000)- Inventories: $400,000- Land: $400,000Net depreciated book value at the end of the year = $(800,000 - 300,000) + 400,000 + 400,000 = $1,300,000Average net depreciated book value for State M = $(1,150,000 + 1,300,000) / 2 = $1,225,000Total average net depreciated book value for both states = $1,225,000 (State M) + $725,000 (State O) = $1,950,000O property factor = $725,000 / $1,950,000 = 0.3718 or 37.2%

Valdez Corporation, a Calendar Year Taxpayer, Owns Property in States Account Balances at Beginning of Year \text { Account Balances at Beginning of Year } Account Balances at Beginning of Year

Valdez Corporation, a Calendar Year Taxpayer, Owns Property in States $\text { Account Balances at Beginning of Year }$