Question

Roberto and Reagan are both 25 percent owner/managers for Bright Light Inc. Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA. Bright Light Inc. generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000) loss from the San Francisco store, and a combined $75,000 profit from the remaining stores. If Bright Light Inc. is an S corporation, how much income will be allocated to Roberto?

Answer 1

$31,250

Step-by-step explanation:

Since w know that the total profit which is generated by Bright Light Inc. is $125,000 and the share of Robert and Reagan is 25% in Bright Light Inc.

So, if we compute the Robert income it would be equal to

= Total Profit × ownership percentage

= $125,000 × 25%

= $31,250

Since the Robert income is based on the ownership pattern that's why we compute it by considering ownership share.