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 Jarvies 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:

Description Retail Price Cost EmployeePrice

Specialized road bike $6,400 $4,200 $5,120

Rocky Mountain mountain bike 3,900 3,450 3,120

Trek road bike 2,600 1,700 1,820

Yeti mountain bike 4,500 3,330 3,600

a.What amount is Jarvie required to include in taxable income from these purchases?

Amount to be included _____________________

b.What amount of deductions is Bad Dog allowed to claim from these transactions? __________________________