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		Employee Price
Specialized road bike	$	7,200	$	4,900	$	5,040
Rocky Mountain mountain bike		5,200		3,750		4,160
Trek road bike		3,300		2,760		2,310
Yeti mountain bike		3,300		2,900		2,640

Problem 12-48 Part a (Algo)

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

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