In Determining Whether an Activity Should Be Classified as a Business

question 95

True/False

In determining whether an activity should be classified as a business or as a hobby, the satisfaction of the presumption (i.e., profit in at least 3 out of 5 years) ensures treatment as a business.

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Definitions:

Inventory Holding Gain

The increase in value of inventory held by a company, often due to price increases in the market rather than sales.

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out (LIFO) cost flow assumption but measures those costs in dollar values, rather than in physical units, to account for inflation or deflation.

Initial Adoption

The first-time application of a new accounting principle, standard, or policy by a company in its financial reporting.

Periodic System

An inventory accounting system where inventory levels are updated and the cost of goods sold is calculated periodically at the end of a reporting period.