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:

Segment Reports

Financial analyses that break down a company's operations by divisions or segments to assess each segment's profitability and performance.

Division Managers

Individuals responsible for overseeing specific operational segments or departments within a larger organization, guiding strategic direction and managing daily activities.

Lean Production

A management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.