Gerald is considering buying a used Ford Focus. From reading car magazines, Gerald knows that half of all Ford Focuses up for sale have mechanical problems (they’re lemons), and the other half run just fine (they’re plums). Gerald is willing to pay $10,000 for a plum, but only $4,000 for a lemon. People who own plums are willing to sell them for any price at or above $8,000, and people own lemons are willing to sell them for any price at or above $2,000.
(A) If everyone knows whether a used car is a lemon or a plum, is Gerald likely to purchase a car?
(B) Now suppose Gerald cannot tell whether a used car is a lemon or a plum. Instead, sellers have private information about the quality of their cars. If half of all used Ford Focuses for sale are lemons and half are all plums, then if Gerald is risk-neutral, what's the most he would be willing to pay for a used Ford Focus?
If Gerald offered to pay the owner of used a Ford Focus this amount, would he be likely to be buying a lemon or a plum?

Selected information about income statement accounts for the reed company is presented below (the company's fiscal year ends on december 31): 2018 2017sales $ 4,400,000 $ 3,500,000cost of goods sold 2,860,000 2,000,000administrative expenses 800,000 675,000selling expenses 360,000 312,000interest revenue 150,000 140,000interest expense 200,000 200,000loss on sale of assets of discontinued component 50,000 —on july 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by gaap. the assets of the component were sold on september 30, 2018, for $50,000 less than their book value. results of operations for the component (included in the above account balances) were as follows: 1/1/18-9/30/18 2017 sales $ 400,000 $ 500,000 cost of goods sold (290,000 ) (320,000 )administrative expenses (50,000 ) (40,000 )selling expenses (20,000 ) (30,000 )operating income before taxes $ 40,000 $ 110,000 in addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts: a fire caused $50,000 in uninsured damages to the main office building. the fire was considered to be an infrequent but not unusual event.inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. the inventory was sold as scrap for $5,000.income taxes have not yet been recorded.required: prepare a multiple-step income statement for the reed company for 2018, showing 2017 information in comparative format, including income taxes computed at 40% and eps disclosures assuming 300,000 shares of common stock. (amounts to be deducted should be indicated with a minus sign. round eps answers to 2 decimal places.)