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20 May 2019
Jarvie loves to bike. In fact, he has always turned down betterpaying jobs to work in bicycle shops where he gets an employeediscount. At Jarvieâs current shop, Bad Dog Cycles, each employeeis allowed to purchase four bicycles a year at a discount. Bad Doghas an average gross profit percentage on bicycles of 25 percent.During the current year, Jarvie bought the following bikes:
Description RetailPrice Cost Employee
Price Specialized roadbike $7,200 $5,300 $5,040 Rocky Mountainmountain bike 5,700 4,400 4,560 Trek road bike 2,500 2,250 1,750 Yeti mountainbike 5,700 4,650 4,560
a. What amount is Jarvie required to include in taxable income fromthese purchases?
b. What amount of deductions is Bad Dog allowed to claim from thesetransactions?
Jarvie loves to bike. In fact, he has always turned down betterpaying jobs to work in bicycle shops where he gets an employeediscount. At Jarvieâs current shop, Bad Dog Cycles, each employeeis allowed to purchase four bicycles a year at a discount. Bad Doghas an average gross profit percentage on bicycles of 25 percent.During the current year, Jarvie bought the following bikes:
| Description | RetailPrice | Cost | Employee Price |
| Specialized roadbike | $7,200 | $5,300 | $5,040 |
| Rocky Mountainmountain bike | 5,700 | 4,400 | 4,560 |
| Trek road bike | 2,500 | 2,250 | 1,750 |
| Yeti mountainbike | 5,700 | 4,650 | 4,560 |
| a. | What amount is Jarvie required to include in taxable income fromthese purchases? |
| b. | What amount of deductions is Bad Dog allowed to claim from thesetransactions? |
Lelia LubowitzLv2
23 May 2019