Correct on both counts.
- $250 will be reported as the Cost of Goods Sold.
- Your tools and machinery will either be expense or reported as assets to be depreciated. You can choose to expense the tools and machinery if any of those items are $2500 or less. Turbo Tax will ask you if you wish to make this election under the Safe Harbor Provision.
You can view this Turbo Tax link for more details on this subject.
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