Robbie and Ruben are partners operating a portable toilet lease and maintenance operation. For 2017, net income was $50,000 (without taking into consideration the salary allowances). Robbie and Ruben have salary allowances of $90,000 and $60,000, respectively, and remaining profits and losses are shared 6:4. If their agreement specifies that salaries are allowed only to the extent of income, based on a prorata share of their salary allowances, the division of profits would be:

Question

Quizplus · Accepted Answer

The total salary allowances are $90,000 + $60,000 = $150,000, but the net income is only $50,000. Therefore, they can only take salaries in proportion to their allowances out of the net income. Robbie's share of the total allowances is 90,000 / 150,000 = 60%, and Ruben's is 40%. Thus, Robbie gets 60% of $50,000 = $30,000, and Ruben gets 40% of $50,000 = $20,000.

Robbie and Ruben Are Partners Operating a Portable Toilet Lease