The following condensed income statements of the Jackson Holding Company are pre

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 onsale of division $15,900,000 $10, 500,000 9,650,000 6,450,000 6,250,000 4,050,000 3,560,000 2,960,000 2,690,000 1,090,000 690,000 Income tax expense Net income 3,380,000 1,090,000 1,014,000 327,000 $ 2,366,000 763,000 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 $5,270,000. Book value of the division's assets was $4,580,000. The division's contribution to Jackson's operating income before-tax for each year was as follows 2018 $445,000 2017 $345,000 Assume an income tax rate of 30%

Explanation / Answer

1

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

3135000

1435000

Income tax expense at 30%

940500

430500

Income from continuing operations

2194500

1004500

Discontinued operations:

Income/Loss from operations of discontinued component

245000

-345000

Income tax benefit (expense)

-73500

103500

Income/loss on discounted operations

171500

-241500

Net income

2023000

1246000

1) Income from continuing opearations before income taxes

unadjusted balances

2690000

1090000

Add: Loss from discontinued operations

445000

345000

Adjusted

3135000

1435000

2)   Income from discounting operations

Loss from operations

-445000

-345000

Gain on disposal

690000

245000

-345000

2

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

3135000

1435000

Income tax expense at 30%

940500

430500

Income from continuing operations

2194500

1004500

Discontinued operations:

Income/Loss from operations of discontinued component

-445000

-345000

Income tax benefit (expense)

133500

103500

Income/loss on discounted operations

-311500

-234000

Net income

1788000

1176000

3

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

133500

103500

Income tax expense at 40%

40050

31050

Income from continuing operations

1962000

942000

Discontinued operations:

Income/Loss from operations of discontinued component

-1035000

-390000

Income tax benefit (expense)

310500

117000

Income/loss on discounted operations

-724500

-234000

Net income

1788000

1176000

(3990000)+4580000-445000 = -1035000

1

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

3135000

1435000

Income tax expense at 30%

940500

430500

Income from continuing operations

2194500

1004500

Discontinued operations:

Income/Loss from operations of discontinued component

245000

-345000

Income tax benefit (expense)

-73500

103500

Income/loss on discounted operations

171500

-241500

Net income

2023000

1246000

1) Income from continuing opearations before income taxes

unadjusted balances

2690000

1090000

Add: Loss from discontinued operations

445000

345000

Adjusted

3135000

1435000

2)   Income from discounting operations

Loss from operations

-445000

-345000

Gain on disposal

690000

245000

-345000

2

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

3135000

1435000

Income tax expense at 30%

940500

430500

Income from continuing operations

2194500

1004500

Discontinued operations:

Income/Loss from operations of discontinued component

-445000

-345000

Income tax benefit (expense)

133500

103500

Income/loss on discounted operations

-311500

-234000

Net income

1788000

1176000

3

Jackson Holding company

Comparitive income statement

For the year ended december 31

2018

2017

Income from continuing operating before income taxes

133500

103500

Income tax expense at 40%

40050

31050

Income from continuing operations

1962000

942000

Discontinued operations:

Income/Loss from operations of discontinued component

-1035000

-390000

Income tax benefit (expense)

310500

117000

Income/loss on discounted operations

-724500

-234000

Net income

1788000

1176000

(3990000)+4580000-445000 = -1035000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.