Question

Roberto and Reagan are both 25-percent owner/managers for Bright Light Incorporated. Roberto runs the retail store in Sacramento, California, and Reagan runs the retail store in San Francisco, California. Bright Light generated a $131,300 profit companywide made up of a $76,800 profit from the Sacramento store, a ($29,500) loss from the San Francisco store, and a combined $84,000 profit from the remaining stores. If Bright Light is taxed as a partnership and it is decided that both Roberto and Reagan will be allocated 70 percent of his own store's profit, with the remaining profits allocated pro rata among all the owners, how much income will be allocated to Reagan in total

Answer 1

Answer: $‭3,897.5‬0

Step-by-step explanation:

The profit that is to be shared on a pro rata basis will include:

a. The $84,000 profit from the remaining stores

b. 30% of the profit from Sacramento

c. 30% of the loss from San Francisco

= 84,000 + (0.3 * 76,800) + (0.3 * -29,500)

= $‭98,190‬

Reagan is to get 25% of the above as well as 70% of San Francisco losses.

= (0.25 * ‭98,190‬) + (0.7 * -29,500)

= ‭24,547.5‬0 - ‭20,650‬

= $‭3,897.5‬0