Question

Kevin is the financial manager of Levingston BMW. The shop allows employees to purchase up to two vehicles per year at a discount. Levingston’s average gross profit percentage is 15%. This year Kevin purchased a 530 model and a new M3.

Model	FMV	Dealer cost	Employee Price
530	$63,800	$50,800	$54,400
M3	$71,000	$60,800	$57,800

What amount must Kevin include in income?

Multiple Choice

$2,950.

$2,550.

$22,000.

$0.

Answer 1

Answer : $2,550

Calculation of Qualified employee Discount :

Model : 530:

Qualified Employee Discount = $63,800*15% = $ 9,570

Actual Disount received by the Kevin = $63,800- $ 54,400 = $ 9,400

Since $ 9,570 >9,400 : No income Inculde on Model 530

Model : M3 :

Qulaified Employee Discount = $71,000*15% = $ 10,650

Actual Disount received by the Kevin = $71,000- $ 57,800= $ 13,200

Since $ 10,650 < $ 13,200 :

income Must Inculde on Model M3 = $13,200-$ 10,650 = $ 2,550 ( Answer)