Valdez Corporation,a calendar-year taxpayer,owns property in States M and O.Both M and O require that the average value of assets be included in the property factor.M requires that the property be valued at its historical cost,and O requires that the property be included in the property factor at its net depreciated book value. Account Balances at Beginning of Year State M State O Totals Inventories $ 200,000 $300,000 $ 500,000 Building & machinery (cost) 700,000 300,000 1,000,000 Accumulated depreciation (150,000) (50,000) (200,000) Land 400,000 200,000 600,000 Totals $1,150,000 $750,000 $1,900,000 Account Balances at Year-End State M State O Totals Inventories $ 400,000 $100,000 $ 500,000 Building & machinery (cost) 800,000 500,000 1,300,000 Accumulated depreciation (300,000) (100,000) (400,000) Land 400,000 200,000 600,000 Totals $1,300,000 $700,000 $2,000,000 Valdez's O property factor is:

Question

Valdez Corporation,a calendar-year taxpayer,owns property in States M and O.Both M and O require that the average value of assets be included in the property factor.M requires that the property be valued at its historical cost,and O requires that the property be included in the property factor at its net depreciated book value. Account Balances at Beginning of Year State M State O Totals Inventories $ 200,000 $300,000 $ 500,000 Building & machinery (cost) 700,000 300,000 1,000,000 Accumulated depreciation (150,000) (50,000) (200,000) Land 400,000 200,000 600,000 Totals $1,150,000 $750,000 $1,900,000 ​ Account Balances at Year-End State M State O Totals Inventories $ 400,000 $100,000 $ 500,000 Building & machinery (cost) 800,000 500,000 1,300,000 Accumulated depreciation (300,000) (100,000) (400,000) Land 400,000 200,000 600,000 Totals $1,300,000 $700,000 $2,000,000 Valdez's O property factor is:

Quizplus · Accepted Answer

The property factor for State O is calculated using the net depreciated book value. The average value of assets in State O is calculated as follows: [(Beginning Inventory + Ending Inventory)/2 + (Beginning Building & Machinery - Beginning Accumulated Depreciation + Ending Building & Machinery - Ending Accumulated Depreciation)/2 + (Beginning Land + Ending Land)/2]. The total average value of assets is calculated similarly for both states. The property factor for State O is then the average value of assets in State O divided by the total average value of assets.

Valdez Corporation,a Calendar-Year Taxpayer,owns Property in States M and O