Question
Jarvie loves to bike. In fact, he has always turned down better-paying jobs to work in bicycle shops where he gets an employee discount. At
Jarvie loves to bike. In fact, he has always turned down better-paying jobs to work in bicycle shops where he gets an employee discount. At Jarvie's current shop, Bad Dog Cycles, each employee is allowed to purchase four bicycles a year at a discount. Bad Dog has an average gross profit percentage on bicycles of 25 percent. During the current year, Jarvie bought the following bikes:
Retail Employee
Description Price Cost Price
Specialized road bike $4100 $2800 $2870
Rocky Mountain mountain bike $7,700 $5,900 $6,160
Trek road bike $3,600 $3,060 $2,520
Yeti mountain bike$ $4,400 $3,480 $3,520
a.What amount is Jarvie required to include in taxable income from these purchases?
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