Mack and Ruben are partners operating an electronics repair shop.For 2014, net income, after salaries expense of $150,000 was $50,000.Mack and Ruben have salary allowances of $90,000 and $60,000, respectively, and remaining profits and losses are shared 6:4.
The division of salaries and profits in total to Mack and Ruben would be:

Question

Quizplus · Accepted Answer

To determine the division of profits, we need to first subtract the salaries from the net income:
$50,000 - $150,000 = -$100,000 (loss)

Since Mack's salary allowance is $90,000, he would receive the entire $50,000 of profits to cover his salary and still have $40,000 left over to share in the 6:4 ratio. Ruben's salary allowance is only $60,000, so he would not receive any additional profits to cover his salary.

The remaining profits to be shared in the ratio of 6:4 is $40,000. To determine the amounts each partner would receive, we can use the following formula:
Partner's share = (Total share) x (Percentage)

Mack's share:
(6/10) x $40,000 = $24,000
Plus his salary allowance:
$24,000 + $90,000 = $114,000

Ruben's share:
(4/10) x $40,000 = $16,000
Plus his salary allowance:
$16,000 + $60,000 = $76,000

Therefore, the division of salaries and profits in total to Mack and Ruben would be $120,000 and $80,000, respectively. The answer is C.

Mack and Ruben Are Partners Operating an Electronics Repair Shop