Charles Owns a Business with Two Separate Departments

question 29

Multiple Choice

Charles owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Charles participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments.

• A) If Charles elects to treat both departments as a single activity, he cannot offset the $60,000 loss against the $100,000 income.
• B) Charles may not treat Department A and Department B as separate activities because they are parts of one business.
• C) If Charles elects to treat the two departments as separate activities, he can offset the $60,000 loss against the $100,000 income.
• D) If Charles elects to treat both departments as a single activity, he can offset the $60,000 loss against the $100,000 income.
• E) None of the above.

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Definitions:

Subcontractors

Third-party businesses or individuals hired to perform part of the work that was originally contracted by another company.

New Facilities

Refers to the construction or opening of new physical buildings or infrastructure for business or operational use.

Break-Even

is a financial term indicating the point at which costs or expenses and revenue are equal, resulting in no net loss or gain.

Total Revenue

The entire amount of income generated by the sale of goods or services before any deductions are made.