Question

Zhou owns a nonrental business with two separate departments. department a generates net income of $122,400, and department b generates a net loss of $97,920. zhou participates 800 hours in the operations of department a and 300 hours in the operations of department b. if zhou is allowed to treat the departments as components of a single activity, calculate the amount of the department b loss that can be offset against the income from department a in the current year.

Answer 1

Department B's net loss of $97,920 can be offset against Department A's net income of $122,400, resulting in a remaining net income of $24,480 for Zhou's single business activity.

Step-by-step explanation:

Zhou owns a nonrental business with two departments, one being profitable (Department A) and the other operating at a loss (Department B). When treating the departments as a single activity, the net loss from Department B can be offset against the income from Department A. To calculate the offset, simply subtract the loss of Department B from the income of Department A.

Net Income of Department A: $122,400
Net Loss of Department B: $97,920
Department B's loss offset against Department A: $122,400 - $97,920 = $24,480.

Therefore, Department B's loss that can be offset against the income from Department A in the current year is $24,480. Zhou's total business activity shows a net profit after the offset, which will be reported on the current year's financial statements and tax filings.