Jed Spends 32 Hours a Week, 50 Weeks a Year

question 54

Multiple Choice

Jed spends 32 hours a week, 50 weeks a year, operating a bicycle rental store that he owns at a resort community. He also owns a music store in another city that is operated by a full-time employee. He elects not to group them together as a single activity under the "appropriate economic unit" standard. Jed spends 40 hours per year working at the music store.

• A) Neither store is a passive activity.
• B) Both stores are passive activities.
• C) Only the bicycle rental store is a passive activity.
• D) Only the music store is a passive activity.
• E) None of the above.

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Definitions:

Contra-asset Account

A type of account in the general ledger that reduces the value of a related account when its balance is subtracted from the balance of the related account.

Contra-revenue Account

An account that is offset against a revenue account on the income statement, typically relating to sales returns, allowances, and discounts.

Restructure Loan

The process of modifying the terms of a loan agreement, typically to provide relief to the borrower by reducing interest rates, extending payment periods, or forgiving part of the loan.

Financial Difficulties

Situations where an individual or organization struggles to manage their money effectively, often leading to debt or bankruptcy.