The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2016 and 2015: 2016 2015 $15,000,000 9,200,000 $9,600,000 6,000,000 Sales Cost of goods sold Gross profit Operating expenses 5,800,000 3,200,000 3,600,000 2,600,000 Operating income Gain on sale of division 2,600,000 600,000 1,000,000 3,200,000 1,280,000 1,000,000 400,000 Income tax expense $ 1,920,000 $ 600,000 Net income On October 15, 2016, 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, 2016, for $5,000,000. Book value of the division's assets was $4,400,000. The division's contribution to Jack- son's operating income before-tax for each year was as follows: $400,000 loss $300,000 loss 2016 2015 Assume an income tax rate of 40%.
The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2016 and 2015: 2016 2015 $15,000,000 9,200,000 $9,600,000 6,000,000 Sales Cost of goods sold Gross profit Operating expenses 5,800,000 3,200,000 3,600,000 2,600,000 Operating income Gain on sale of division 2,600,000 600,000 1,000,000 3,200,000 1,280,000 1,000,000 400,000 Income tax expense $ 1,920,000 $ 600,000 Net income On October 15, 2016, 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, 2016, for $5,000,000. Book value of the division's assets was $4,400,000. The division's contribution to Jack- son's operating income before-tax for each year was as follows: $400,000 loss $300,000 loss 2016 2015 Assume an income tax rate of 40%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Required: 1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. 2. Assume that by December 31, 2016, 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 $5,000,000. How would the presentation of discontinued operations be different from your answer to requirement 1? 3. Assume that by December 31, 2016, 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 $3,900,000. How would the presentation of discontinued operations be different from your answer to requirement 1?
Transcribed Image Text:The following condensed income statements of the Jackson Holding Company are presented for the two years
ended December 31, 2016 and 2015:
2016
2015
$15,000,000
9,200,000
$9,600,000
6,000,000
Sales
Cost of goods sold
Gross profit
Operating expenses
5,800,000
3,200,000
3,600,000
2,600,000
Operating income
Gain on sale of division
2,600,000
600,000
1,000,000
3,200,000
1,280,000
1,000,000
400,000
Income tax expense
$ 1,920,000
$ 600,000
Net income
On October 15, 2016, 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,
2016, for $5,000,000. Book value of the division's assets was $4,400,000. The division's contribution to Jack-
son's operating income before-tax for each year was as follows:
$400,000 loss
$300,000 loss
2016
2015
Assume an income tax rate of 40%.
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