Albany,Inc.does business in states C and D.State D uses an apportionment formula that double-weights the sales factor; state C apportions income using an equally-weighted three-factor formula.Albany's before tax income is $3,000,000,and its sales,payroll,and property factors are as follows. Calculate Albany's income taxable in each state.

Question

Albany,Inc.does business in states C and D.State D uses an apportionment formula that double-weights the sales factor; state C apportions income using an equally-weighted three-factor formula.Albany's before tax income is $3,000,000,and its sales,payroll,and property factors are as follows.   Calculate Albany's income taxable in each state.

Quizplus · Accepted Answer

For state C: 
Sales factor: 60% x $5,000,000 = $3,000,000 
Payroll factor: 20% x $1,000,000 = $200,000 
Property factor: 20% x $2,000,000 = $400,000 
Apportionment factor: (3,600,000 / 6,000,000) = 0.6 
Income taxable in state C: $3,000,000 x 0.6 = $1,800,000

For state D: 
Sales factor: 90% x $5,000,000 = $4,500,000 
Payroll factor: 5% x $1,000,000 = $50,000 
Property factor: 5% x $2,000,000 = $100,000 
Apportionment factor: { [ (4,500,000 x 2) + 50,000 + 100,000 ] / (2 x 5,000,000) } = 0.55 
Income taxable in state D: $3,000,000 x 0.55 = $1,650,000

Total income taxable in both states: $1,800,000 + $1,650,000 = $3,450,000

Therefore, the correct answer is A) State C,$1,100,000; State D,$1,800,000.