Question

In: Accounting

Harper, Inc. is incorporated in State 1 but also has offices in States 2, 3, and...


Harper, Inc. is incorporated in State 1 but also has offices in States 2, 3, and 4. All four states use the Uniform Division of Income for Tax Purposes Act (UDITPA) three-factor formula for determining the state apportionment percentage. Based on the following financial information, what percentages of Harper’s income should be apportioned to States 1 and 2? Round to the nearest whole percentage. Please show your calculations at how you arrived at your answer.

Gross Sales Payroll Expense Property Costs
State 1 $ 2,880,000 $ 332,800 $ 1,000,000
State 2 $ 840,000 $ 183,200 $ 104,000
State 3 $ 420,000 $ 93,600 $ 128,000
State 4 $ 1,660,000 $ 280,800 $ 136,000
Total $ 5,800,000 $ 890,400 $ 1,368,000

Solutions

Expert Solution

Gross Sales

Percentage

Payroll Expense

Percentage

Property Costs

Percentage

State 1

2,880,000

49.6552%

332,800

37.3765%

1,000,000

73.0994%

State 2

840,000

14.4828%

183,200

20.5750%

104,000

7.6023%

State 3

420,000

7.2414%

93,600

10.5121%

128,000

9.3567%

State 4

1,660,000

28.6207%

280,800

31.5364%

136,000

9.9415%

Total

5,800,000

100.0000%

890,400

100.0000%

1,368,000

100.0000%

For Sale

State 1

2880000/5800000

49.6552%

State 2

840000/5800000

14.4828%

Same for all

Percentage

Gross Sales

Payroll Expense

Property Costs

Total

Income should be apportioned (Total / 3)

State 1

49.6552%

37.3765%

73.0994%

160.1310%

53.38%

State 2

14.4828%

20.5750%

7.6023%

42.6601%

14.22%

State 3

7.2414%

10.5121%

9.3567%

27.1102%

9.04%

State 4

28.6207%

31.5364%

9.9415%

70.0986%

23.37%

What percentages of Harper’s income should be apportioned to States 1 and 2?

State 1

53%

State 2

14%


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