Jenna Leigh Is Employed as a Receptionist for a CPA

question 48

Multiple Choice

Jenna Leigh is employed as a receptionist for a CPA firm,but on evenings and weekends,she bakes wedding cakes.In each of the past four years,Jenna's baking activity resulted in a net profit.This year,the activity generated a $720 net loss.Which of the following statements is true?

• A)The legal presumption is that Jenna's $720 loss is a business loss.
• B)The legal presumption is that Jenna's $720 loss is a nondeductible hobby loss.
• C)Jenna must include the revenues from her baking activity in gross income but can't deduct any of her related expenses.
• D)Jenna is allowed to report her $720 loss as a miscellaneous itemized deduction.

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Definitions:

Geographic Segment

A part of a business that operates in a specific geographical area that is significant enough to require separate financial reporting.

U.S. GAAP

Short for United States Generally Accepted Accounting Principles, it represents the framework and specific rules for financial accounting and reporting in the U.S.

Gross Profit

The difference between revenue and the cost of goods sold, representing the amount before operating expenses, interest, and taxes are deducted.

LIFO Method

The Last In, First Out method for inventory valuation where the most recently produced or purchased items are the first to be expensed.