Bloomsburg Corporation a calendar year taxpayer sells comput

Bloomsburg Corporation, a calendar year taxpayer, sells computer monitors through big box stores. It manufactures some of the computer monitors and imports some from unrelated foreign producers. For tax year 2017, Bloomsburg\'s records reveal the following information:

Monitors Sold

Manufactured (Gross Receipts): $1,450,000

Imported (Gross Receipts): $900,000

Bloomsburg also has selling and marketing expenses of $340,000 and administrative expenses of $89,000. Bloomsburg\'s records do not identify its CGS (as between manufactured and imported monitors) but reflect an unallocated amount of $600,000. Further assume that Bloomsburg is qualified to (and does) use the small business simplified method of allocating CGS and other expenses. Determine Bloomsburg\'s QPAI and DPAD.

In your computations, round division to three decimal places. Round the final answers to the nearest dollar.

a. Bloomsburg\'s QPAI is $.

b. Bloomsburg\'s DPAD is $.

Solution

QPAI = Domestic Production gross receipts – Total allocable expenditure

Domestic Production gross receipts = $1450000

Total allocable Exp (Since it is qualified to use the small business simplified method to allocating CGS deductions it can allocate in relative gross receipts ratio

Selling and marketing Exp = $209787.2

[340000*145/(145*90)]

Admin Exp = $54914.89

[89000*145/(145+90)]

CGS = $370212.8

[600000*145/(145+90)]

QPAI = $1450000 - $209787.2 – 54914.89 – 370212.8 = $815085.1

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Bloomberg’s DPAD = 9% of QPAI = 815085.1* 0.09

                                  = $73357.66

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