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The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2013 and 2012:


 2013 2012
  Sales $ 16,800,000
$ 11,400,000
  Cost of goods sold
10,100,000

6,900,000







  Gross profit
6,700,000

4,500,000
  Operating expenses
3,920,000

3,320,000







  Operating income
2,780,000

1,180,000
  Gain on sale of division
780,000

-









3,560,000

1,180,000
  Income tax expense
1,424,000

472,000







  Net income $ 2,136,000
$ 708,000








On October 15, 2013, 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, 2013, for $5,540,000. Book value of the division's assets was $4,760,000. The division's contribution to Jackson's operating income before-tax for each year was as follows:
   2013 $490,000 loss
   2012 $390,000 loss
Assume an income tax rate of 40%.
Required:

1.

Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)


      
2.

Assume that by December 31, 2013, the division had not yet been sold but was considered held for sale. The fair value of the division's assets on December 31 was $5,540,000. How would the presentation of discontinued operations be different from your answer to part 1?


     

3.

Assume that by December 31, 2013, the division had not yet been sold but was considered held for sale. The fair value of the division's assets on December 31 was $4,080,000. How would the presentation of discontinued operations be different from your answer to part 1?

Accounting Basics, Accounting

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  • Reference No.:- M9953999

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