Ray owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Ray participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments. Which of the following statements is correct?

a.

If Ray elects to treat both departments as a single activity, he can offset the $60,000 loss against the $100,000 income.

b.

If Ray elects to treat the two departments as separate activities, he can offset the $60,000 loss against the $100,000 income.

c.

If Ray elects to treat both departments as a single activity, he cannot offset the $60,000 loss against the $100,000 income.

d.

None of the above.

Question

Madelyn Reid

Business

21 October, 02:33

Ray owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Ray participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments. Which of the following statements is correct?

a.

If Ray elects to treat both departments as a single activity, he can offset the $60,000 loss against the $100,000 income.

b.

If Ray elects to treat the two departments as separate activities, he can offset the $60,000 loss against the $100,000 income.

c.

If Ray elects to treat both departments as a single activity, he cannot offset the $60,000 loss against the $100,000 income.

d.

None of the above.

+4

Answers (1)

Know the Answer?

Dwayne Bradshaw · Answer 1

A) If Ray elects to treat both departments as a single activity, he can offset the $60,000 loss against the $100,000 income.

Explanation:

Ray probably decided to separate both departments in order to have a more precise record of each department's performance, but he can decide to treat them as a single unit and combine both departments' revenues and costs. By doing that, the income generated by department A would offset the losses from department B.