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:

Breakthrough Stage

A phase in development where significant and sudden progress or advance is made in understanding or innovation.

Entrepreneurial Firms

Companies that pursue opportunities, regardless of the resources they currently control, characterized by innovation, risk-taking, and proactiveness.

Investing Wisely

The process of allocating resources, typically money, in different financial instruments or assets with the aim of generating favorable returns while managing risks.

Flexible

The ability to adapt to changes and respond to varying needs and conditions with ease.