Judy Holly (Judy’s daughter) Terry (Judy’s son) John (an unrelated third party) $470,000 100,000 100,000 320,000 Holly and Terry are the only shareholders of Pink Corporation. Judy and John share equally in the management of the company's operations. Holly and Terrγare both full-time college students at a university 200 miles away. Pink has substantial E & P and has never distributed a dividend. Discuss any problems related to Pink’s salary arrangement.

Magic realm, inc., has developed a new fantasy board game. the company sold 15,000 games last year at a selling price of $20 per game. fixed expenses associated with the game total $182,000 per year, and variable expenses are $6 per game. production of the game is entrusted to a printing contractor. variable expenses consist mostly of payments to this contractor.required: 1-a. prepare a contribution format income statement for the game last year.1-b. compute the degree of operating leverage.2. management is confident that the company can sell 58,880 games next year (an increase of 12,880 games, or 28%, over last year). given this assumption: a. what is the expected percentage increase in net operating income for next year? b. what is the expected amount of net operating income for next year? (do not prepare an income statement; use the degree of operating leverage to compute your answer.)