Priscella pursues a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is dollar 40,000. During the year, she sold the bedspreads for dollar 10,000. She incurred expenses as follows: Assuming that the activity is deemed a hobby, how should she report these items on her tax return? Include dollar 10,000 in income and deduct dollar 11.000 for AGI. Ignore both income and expenses since hobby losses are disallowed. Include dollar 10,000 in income, deduct nothing for AGI. and claim dollar 10,000 of the expenses as itemized deductions. Include dollar 10,000 in income and deduct interest of dollar 500 for AGI