Question;26. LO.1 Use Figure 24.1 to compute Balboa Corporation?s State F taxable income for the year.Addition modifications $29,000Allocated income (total) 25,000Allocated income (State F) 3,000Allocated income (State G) 22,000Tax credits 800Federal taxable income 90,000Subtraction modifications 15,000Apportionment percentage 40%Tax rate 5%27. LO.1 Use Figure 24.1 to provide the required information for Warbler Corporation, whose Federal taxable income totals $10 million.Warbler apportions 70% of its business income to State C. Warbler generates $4 million of nonbusiness income each year, and 30% of that income is allocated to C. Applying the state income tax modifications, Warbler?s total business income this year is $12 million.a. How much of Warbler?s business income does State C tax?b. How much of Warbler?s nonbusiness income does State C tax?c. Explain your results.28. LO.1 For each of the following items considered independently, indicate whether the circumstances call for an addition modification (A), a subtraction modification (S), or no modification (N) in computing state taxable income. Then indicate the amount of any modification. The starting point in computing State Q taxable income is the year?sFederal taxable income, before any deduction for net operating losses.a. Federal cost recovery = $10,000, and Q cost recovery = $15,000.b. Federal cost recovery = $15,000, and Q cost recovery = $10,000.c. Federal income taxes paid = $30,000.d. Refund received from last year?s Q income taxes = $3,000.e. Local property taxes, deducted on the Federal return as a business expense = $80,000.f. Interest income from holding U.S. Treasury bonds = $5,000.g. Interest income from holding Q revenue anticipation bonds = $3,000.h. Interest income from State P school district bonds = $10,000.i. Change in the excess of FIFO inventory valuation over the Federal LIFO amount = $6,000. Q does not allow the LIFO method.j. An asset was sold for $18,000, its purchase price was $20,000. Accumulated Federal cost recovery = $15,000, and accumulated Q cost recovery = $8,000.k. Dividend income received from State R corporation = $30,000, subject to a Federal dividends received deduction of 70%.29. LO.1 Perk Corporation is subject to tax only in State A. Perk generated the following income and deductions.Federal taxable income $300,000State A income tax expense 15,000Refund of State A income tax 3,000Depreciation allowed for Federal tax purposes 200,000Depreciation allowed for state tax purposes 120,000Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible for A tax purposes. Determine Perk?s A taxable income.30. LO.1 Fellow Corporation is subject to tax only in State X. Fellow generated the following income and deductions. State income taxes are not deductible for X income tax purposes.Sales $4,000,000Cost of sales 2,800,000State X income tax expense 200,000Depreciation allowed for Federal tax purposes 400,000Depreciation allowed for state tax purposes 250,000Interest income on Federal obligations 40,000Interest income on X obligations 30,000Expenses related to carrying X obligations 2,000a. The starting point in computing the X income tax base is Federal taxable income.Derive this amount.b. Determine Fellow?s X taxable income assuming that interest on X obligations is exempt from X income tax.c. Determine Fellow?s X taxable income assuming that interest on X obligations is subject to X income tax.31. LO.4, 5 Joker Corporation owns and operates two facilities that manufacture paper products. One of the facilities is located in State D, and the other is located in State E.Joker generated $3.2 million of taxable income, consisting of $3 million of income from its manufacturing facilities and a $200,000 gain from the sale of E nonbusiness property. E does not distinguish between business and nonbusiness income, but D apportions business income. Joker?s activities within the two states are outlined below.State D State E TotalSales of paper products $3,000,000 $7,000,000 $10,000,000Property 600,000 1,500,000 2,100,000Payroll 1,000,000 2,000,000 3,000,000Both D and E utilize a three-factor apportionment formula, under which sales, property, and payroll are equally weighted. Determine the amount of Joker?s income that is subject to income tax by each state.32. LO.4, 5 Assume the same facts as in Problem 31, except that under the statutes of both D and E, only business income is subject to apportionment.33. LO.5 Dillman Corporation has nexus in States A and B. Dillman?s activities for the year are summarized below.State A State B TotalSales $1,200,000 $ 400,000 $1,600,000PropertyAverage historical cost 500,000 300,000 800,000Average accumulated depreciation (300,000) (100,000) (400,000)Payroll 2,500,000 500,000 3,000,000Rent expense ?0? 35,000 35,000Determine the apportionment factors for A and B assuming that A uses a three-factor apportionment formula under which sales, property (net depreciated basis), and payroll are equally weighted and B employs a single-factor formula that consists solely of sales.State A has adopted the UDITPA with respect to the inclusion of rent payments in the property factor.34. LO.5 Assume the same facts as in Problem 33, except that A uses a single-factor apportionment formula that consists solely of sales and B uses a three-factor apportionment formula that equally weights sales, property (at historical cost), and payroll. State B does not include rent payments in the property factor.35. LO.5 Assume the same facts as in Problem 33, except that both states employ a three factor formula, under which sales are double-weighted. The property factor in A is computed using historical cost, while this factor in B is computed using the net depreciated basis. Neither A nor B includes rent payments in the property factor.36. LO.5 Roger Corporation operates in two states, as indicated below. This year?s operations generated $400,000 of apportionable income.State A State B TotalSales $800,000 $200,000 $1,000,000Property 300,000 300,000 600,000Payroll 200,000 50,000 250,000Compute Roger?s State A taxable income assuming that State A apportions income based on a:a. Three-factor formula, equally weighted.b. Double-weighted sales factor.c. Sales factor only.37. LO.5, 9 State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Clay Corporation, headquartered in E, reported the following sales for the year. All of the goods were shipped from Clay?s E manufacturing facilities.Customer Customer?s Location This Year?s SalesShellTell, Inc. E $ 75,000,000Tourists, Ltd. F 40,000,000PageToo Corp. G 100,000,000U.S. Department ofHomeland Security All 50 states 85,000,000Total $300,000,000a. Determine Clay?s sales factor in those states.b. Comment on Clay?s location strategy using only your tax computations.
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