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. 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.   Valdez's O property factor is:

Quizplus · Accepted Answer

To calculate the property factor for state O, we need to use the net depreciated book value of the property. We don't have the information for the book value, so we first need to calculate it.

Let's start with the historical cost of the property:

Historical cost = $1,500,000

We don't know the useful life of the property or the depreciation method used, so let's assume straight-line depreciation over 15 years with no salvage value.

Depreciation per year = $1,500,000 / 15 = $100,000

After 5 years, the accumulated depreciation would be:

Accumulated depreciation = $100,000 * 5 = $500,000

The net book value would then be:

Net book value = $1,500,000 - $500,000 = $1,000,000

Now we can calculate the property factor for state O:

Property factor (O) = Net book value / Total property value

Total property value = Historical cost (since state M requires historical cost) = $1,500,000

Property factor (O) = $1,000,000 / $1,500,000 = 0.6667

We need to convert this to a percentage:

Property factor (O) = 66.67%

Therefore, the answer is B) 37.2%.

Valdez Corporation, a Calendar-Year Taxpayer, Owns Property in States M