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

Requirement 1: PARTICULARS 2017 2018 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX OPERATING INCOME 2690000 1090000 INCOME FORM DISCONTINUE DEVISION 445000 345000 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX 2245000 745000 DICONTINUING OPERATIONS GAIN OR LOSS SALE CONSIDERATION 5270000 0 LESS: VALUE OF ASSETS 4580000 0 LESS: INCOME FORM DISCONTINUE DEVISION 445000 345000 GAIN OR LOSS 245000 -345000 Requirement 1: PARTICULARS 2017 2018 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX OPERATING INCOME 2690000 1090000 INCOME FORM DISCONTINUE DEVISION 445000 345000 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX 2245000 745000 DICONTINUING OPERATIONS GAIN OR LOSS SALE CONSIDERATION 5270000 0 LESS: VALUE OF ASSETS 5270000 0 LESS: INCOME FORM DISCONTINUE DEVISION 445000 345000 GAIN OR LOSS -445000 -345000 Requirement 1: PARTICULARS 2017 2018 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX OPERATING INCOME 2690000 1090000 INCOME FORM DISCONTINUE DEVISION 445000 345000 INCOME FORM CONTINUING OPERATIONS BEFORE INCOME TAX 2245000 745000 DICONTINUING OPERATIONS GAIN OR LOSS SALE CONSIDERATION 5270000 0 LESS: VALUE OF ASSETS 3990000 0 LESS: INCOME FORM DISCONTINUE DEVISION 445000 345000 GAIN OR LOSS 835000 -345000

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