Check my worl The following condensed income statements of the Jackson Holding C

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Check my worl 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 4,400,000 3,240, 000 2,760,000 1,160,000 10 points 6,600,000 3,840,000 760,000 3,520,000 eBook Print References 1,160,000 1,056,000348,000 $ 2,464,000 $ 812,000 Income tax expense Net income 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%.

Explanation / Answer

JACKSON HOLDING COMPANY Comparative Income Statement For the year ended DEC 2018 2017 1 Income from continuing operation before income taxes $3,240,000 $1,540,000 Income Tax Expense @30% $972,000 $462,000 Income from continuing operation $2,268,000 $1,078,000 Discontinue Operation Income (loss) from operations of discontinued component( Included gain on disposal of $760000 in 2018 $280,000 -$380,000 Income Tax benefit (Expense) -$84,000 $114,000 Income (Loss) on discontinue operation $196,000 -$266,000 Net Income $2,464,000 $812,000 Working 2018 2017 Income from continuing operation before income taxes Unadjusted $2,760,000 $1,160,000 Add: Loss from disconinue opeartion $480,000 $380,000 Adjusted $3,240,000 $1,540,000 Income from discontinuing operations Loss form operation -$480,000 -$380,000 Gain on disposal $760,000 Total $280,000 -$380,000 2 In 2018 income from discontinued operations would include only loss from operations of $4,80,000.Since no impairment loss is indicated ($5,480,000-$4,720,000)=$ 7,60,000 antcipated gain.The anticipated gain on disposal is not recognised until it is realized. Fair Value $5,480,000 Book Value $4,720,000 Gain $760,000 loss from operations -$480,000 Total Gain $280,000 3 In 2018 income from discontinued operation would include the loss from operation of $4,80,000 and impairment loss of$560,000 ($4,520,000-$3,960,000) Fair Value $4,060,000 Book Value $4,720,000 Loss -$660,000 Loss from operations -$480,000 (Given) Total Loss -$1,140,000

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