Arthur Is Driving Home from Work When He Runs Off

question 5

Multiple Choice

Arthur is driving home from work when he runs off the road and hits a telephone pole. These are the losses he suffers: $12,000 to repair the damage to his car, and, $800 to rent a car while his car is being repaired. What is the correct name for each of these losses?

• A) The $12,000 is an indirect loss, and the $800 is a direct loss.
• B) The $12,000 is a direct loss, and the $800 is also a direct loss.
• C) The $12,000 is a direct loss, and the $800 is an indirect loss.
• D) The total loss of $12,800 is a direct loss.

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Definitions:

Partnerships

A business structure where two or more individuals manage and operate a business in accordance with terms set out in a Partnership Agreement.

Sole Proprietorship

A business owned and operated by one person.

Corporation

A business structure that creates an entity separate from its owners and managers.

Public Company

A corporation whose shares are traded openly on stock exchanges, subject to regulatory oversight and required to disclose financial and other significant information.