Question
Guilford Corporation is subject to franchise tax in State Z. The tax is imposed at a rate of 2.5% of the taxpayer's net worth that
Guilford Corporation is subject to franchise tax in State Z. The tax is imposed at a rate of 2.5% of the taxpayer's net worth that is apportioned to the state by use of a two-factor (sales and property equally weighted) formula. The property factor includes real and tangible personal property valued at net book value at the end of the taxable year. Of Guilford's sales, 60% are attributable to State Z, and $200,000 of the net book value of it's tangible personal property is located in State Z. Determine the State Z franchise tax payable by Guilford this year given the following end-of-the year balance sheet.
Cash | $ 100,000 | |
Equipment | $800,000 | |
Accumulated Depreciation | (200,000) | 600,000 |
Furniture and Fixtures | $150,000 | |
Accumulated Depreciation | (50,000) | 100,000 |
Intangible Assets | 200,000 | |
Total Assets | $1,000,000 |
Accounts and Taxes Payable | $ 150,000 |
Long-term Debt | 300,000 |
Common Stock | 10,000 |
Additional Paid-in Capital | 600,000 |
Retained Earnings | (60,000) |
Total Liabilities and Equity | $1,000,000 |
a. $-0-, due to the negative retained earnings
b. $6,050
c. $13,750
d. $8,250
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