Question

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2018 and 2017: 2018 2017 Sales Cost of goods sold Gross profit Operating expenses Operating income Gain on sale of division $16,600,000 $11,200,000 10,000,000 6,800,000 6,600, 000 4,400,000 3,840,000 3,240,000 2,760, 000 ,160,000 760,000 Incone tax expense Net income 3,520, 000 ,160,000 348,000 $ 2,464,000 812,000 1,056,000 On October 15, 2018, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2018, for $5,480,000. Book value of the division's assets was $4,720,000. The division's contribution to Jackson's operating income before-tax for each year was as follows: 2018 $480,000 2017 $380,000 Assume an income tax rate of 30%. 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 operations before income taxes. Ignore EPS disclosures

Answer 1