Helene 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. Helene'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.

Helene's apportionable income assigned to A is:

Question

Helene 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. Helene'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.

Helene's apportionable income assigned to A is:

Quizplus · Accepted Answer

State A: 
Sales Factor: $350,000/$1,050,000 = 1/3 
Property Factor: $300,000/$900,000 = 1/3 
Payroll Factor: $200,000/$600,000 = 1/3 
Apportionment Factor: (1/3 + 1/3 + 1/3)/3 = 1/3 
Apportioned Income: $1,000,000 x 1/3 = $333,333.33

State B: 
Sales Factor: $400,000 x 2/$1,050,000 = 0.7619 
Property Factor: $300,000/$900,000 = 1/3 
Payroll Factor: $200,000/$600,000 = 1/3 
Apportionment Factor: (0.7619 + 1/3 + 1/3)/3 = 0.48810 
Apportioned Income: $1,000,000 x 0.48810 = $488,100

State C: 
Sales Factor: $300,000/$1,050,000 = 0.2857 
Apportioned Income: $1,000,000 x 0.2857 = $285,700

Total apportioned income: 
$333,333.33 + $488,100 + $285,700 = $1,107,133.33

Because total apportioned income exceeds $1,000,000, the apportioned income must be reduced to its original amount by a process known as "equitable apportionment."

Equitable apportionment: 
$1,107,133.33 ÷ $1,000,000 = 1.1071 
$333,333.33 ÷ 1.1071 = $301,113.07 (State A) 
$488,100 ÷ 1.1071 = $440,469.77 (State B) 
$285,700 ÷ 1.1071 = $257,417.16 (State C)

Therefore, the correct answer is C, $311,100 (rounded to the nearest whole number).

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