Harold conducts a business with the following results for the year: Amortization

Question

Harold conducts a business with the following results for the year:

Amortization of intangibles

If the activity was a hobby, Harold will report $ _______as income and deduct $ _______ as expenses.

Not sure what to put in the blanks. I know the first blank is $20,000, but how much is deducted as expenses if its a hobby?

680

Revenue $20,000 Depreciation on car 3,960 Operating expenses of car 3,100 Rent 6,000 Wages 8,200

Amortization of intangibles

If the activity was a hobby, Harold will report $ _______as income and deduct $ _______ as expenses.

Not sure what to put in the blanks. I know the first blank is $20,000, but how much is deducted as expenses if its a hobby?

680

Explanation / Answer

The income will be = $ 20,000

Expense to be deducted:

Depreciation on car = $ 3,960

Operating expense of the car = $ 3,100

Hence the expense for the activity = $ 3,960+ $ 3,100

= $ 7,060

Note: Rent,wages and amortization of intangible assets were not related to car expense, Hence those expenses were not treated as expense relating to car.

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