Robbie and Ruben Are Partners Operating a Portable Toilet Lease

question 38

Multiple Choice

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:

• A) $20,000 and $30,000
• B) $50,000 and $-0-
• C) $30,000 and $20,000
• D) $25,000 and $25,000

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Definitions:

Economic Decisions

Choices made by individuals, households, or governments regarding allocation of resources and distribution of goods and services.

Excess Burden

The cost to society created by market inefficiency, which can occur through such things as government intervention in the market or taxes that distort market outcomes.

Tax Revenue

The money collected by a government from its citizens and businesses through various forms of taxation.

Property Tax

A levy on property that the owner is required to pay, often based on the value of the property.