General Corporation Is Taxable in a Number of States

question 5

Multiple Choice

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State B applies a throwback rule, but State A does not. In which state(s) will the sale be included in the sales factor numerator?

• A) $0 in both A and B.
• B) $100,000 in A.
• C) $100,000 in B.
• D) In both A and B, according to the apportionment formulas of each.

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Definitions:

Freight In

The cost associated with transporting goods from suppliers to the buyer, which is added to the cost of inventory.

Inventory Shrinkage

The loss of products between purchase from supplier and sale to customer, often due to theft, damage, or errors.

Adjusting Entry

A journal entry made in the accounting records at the end of an accounting period to allocate income and expenditure to the correct period.

Periodic Inventory System

An accounting method that determines inventory levels and cost of goods sold at the end of an accounting period through physical counting.