Charles Owns a Business with Two Separate Departments

question 19

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 these is correct.