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:

Unemployment

The condition of being without a job, often measured by the unemployment rate, which is the percentage of the labor force that is jobless and seeking employment.

Leading Economic Indicator

A statistic that predicts future economic activity and trends before they occur, such as the stock market or job applications.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Inflation

Inflation denotes the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.