Lido Inc. does business in two states, X and Y. State X uses an equal-weighted t

Question

Lido Inc. does business in two states, X and Y. State X uses an equal-weighted three-factor apportionment formula and has a 4 percent state tax rate. State Y bases its apportionment only on the sales factor and has a 5 percent state tax rate. Lido's state-level taxable income before apportionment is $1,750,000.

Calculate Lido's apportionment factors, income apportioned to each state, and state tax liability. (Round all apportionment factors to 2 decimal places, e.g., .04715 would be entered as 47.15% and final answer dollar values to the nearest whole dollar.)

State X State Y Total Sales $ 4,600,000 $ 1,300,000 $ 5,900,000 Payroll 1,200,000 800,000 2,000,000 Average property 2,200,000 700,000 2,900,000

Explanation / Answer

Income Apportioned to State X = 71.28% of 1750,000 = $1247341.67 ~ = $1,247,400

Tax liability of state X = $1,247,400 * 4% = $49896

Income Apportioned to State Y = 22.03% of 1750,000 = $ 385525

Tax liability of state Y = $385525.00 * 5% = $19276.25

State X State Y Sales 4600000/5900000 = 77.97% 1300000/5900000=22.03% Payroll 1200000/2000000 = 60.00% 800000/2000000 =40.00% Average Property 2200000/2900000 = 75.86% 700000/2900000 =24.14% Apportionment factor (77.97%+60% +75.86%)/3 =71.28% (22.03*3)/3 = 22.03%

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