ExpertHard1 markMultiple Choice
CPA · Question 08 · Area V: Entity Taxation
Pace Corp. is incorporated in State A but does business in States A, B, and C. State B uses a three-factor apportionment formula (Sales, Payroll, Property) with a double-weighted sales factor. Pace has the following activity in State B:<br/>- Sales: $2,000,000 (Total company sales: $10,000,000)<br/>- Payroll: $500,000 (Total company payroll: $5,000,000)<br/>- Property: $1,000,000 (Total company property: $4,000,000)<br/>What is Pace's apportionment percentage for State B?
Pace Corp. is incorporated in State A but does business in States A, B, and C. State B uses a three-factor apportionment formula (Sales, Payroll, Property) with a double-weighted sales factor. Pace has the following activity in State B:<br/>- Sales: $2,000,000 (Total company sales: $10,000,000)<br/>- Payroll: $500,000 (Total company payroll: $5,000,000)<br/>- Property: $1,000,000 (Total company property: $4,000,000)<br/>What is Pace's apportionment percentage for State B?
Answer options:
A.
18.75%
B.
20.00%
C.
18.75%
D.
25.00%
How to approach this question
1. Calculate each factor ratio. 2. Apply the weighting (Sales x 2). 3. Divide by the total weights (2 + 1 + 1 = 4).
Full Answer
C.18.75%✓ Correct
C
Sales Factor = $2M/$10M = 20%. Payroll Factor = $0.5M/$5M = 10%. Property Factor = $1M/$4M = 25%. Double-weighted sales formula: (20% x 2 + 10% + 25%) / 4 = (40 + 10 + 25) / 4 = 75 / 4 = 18.75%.
Common mistakes
Dividing by 3 instead of 4 when using double-weighted sales.
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