Question

Check my work The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020: points Sales revenue cost of goods sold Gross profit Operating expenses Operating income Gain on sale of division 2021 2020 $15,400,000 $10,000,000 9.400,000 5,200,000 6,000,000 3,000,000 3,360,000 2.760,000 2.640,000 1,040,000 640,000 3,280,000 1,040,000 820, 000 2 60,000 $ 2,460,000 5 780,000 Income tax expense Net income Reference On October 15, 2021, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualities as a component of an entity as defined by GAAP. The division was sold on December 31, 2021, for $5,120,000. Book value of the division's assets was $4,480,000. The division's contribution to Jackson's operating income before tax for each year was as follows: 2021 2020 $420,000 $320,000 Assume an income tax rate of 25% Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line.) 1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing

Answer 1

1)

Jackson Holding Company
Comparative Income Statement (in Part)
For the Year Ended December 31
	2021	2020
Income from Continuing Operations before Income taxes	$22,20,000	$7,20,000
Income Tax Benifit (Expense) (25%)	($5,55,000)	($1,80,000)
Income from Continuing Operations	$16,65,000	$5,40,000
Discontinuing Operations
Income (loss) from operations of discontinued component	$4,20,000	$3,20,000
Income Tax Benifit (Expense)	($1,05,000)	($80,000)
Gain on Sale of Discontinued Operation s (Net off Taxes)	$4,80,000
Income from Discontinuing Operations	$7,95,000	$2,40,000
Net Income	$24,60,000	$7,80,000

Note :

Income from Continuing Operations:

Particulars	2021	2020
Total Operating Income	$26,40,000	$10,40,000
Operating Income from discontinuing Operations	($4,20,000)	($3,20,000)
Income from Continuing Operations	$22,20,000	$7,20,000

2)

Jackson Holding Company
Comparitive Income Statement (in Part)
For the Year Ended December 31
	2021	2020
Operating Income	$26,40,000	$10,40,000
Fair Value gain on Assets held for sale	$6,40,000
	$32,80,000	$10,40,000
Income Tax Benifit (Expense) (25%)	($8,20,000)	($2,60,000)
Net Income	$41,00,000	$13,00,000

Fair Value gain on Assets held for sale
Particulars	Amount
Fair Value of Division	$51,20,000
Book Value of Division	$44,80,000
Fair Value gain on Assets held for sale	$6,40,000

3)

Jackson Holding Company
Comparative Income Statement (in Part)
For the Year Ended December 31
	2021	2020
Operating Income	$26,40,000	$10,40,000
Fair Value loss on Assets held for sale	($5,40,000)
	$21,00,000	$10,40,000
Income Tax Benifit (Expense) (25%)	($5,25,000)	($2,60,000)
Net Income	$26,25,000	$13,00,000
Fair Value loss on Assets held for sale
Particulars	Amount
Fair Value of Divisinon	$39,40,000
Book Value of Division	$44,80,000
Fair Value gain on Assets held for sale	($5,40,000)