The following condensed income statements of the Jackson Holding Company are pre
ID: 2423755 • Letter: T
Question
The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2013 and 2012:
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 $5,180,000. Book value of the division’s assets was $4,520,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:
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.)
The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2013 and 2012:
Explanation / Answer
2013 2012 Sales $ 1,56,00,000 $ 1,02,00,000 Cost of goods sold 95,00,000 63,00,000 Gross profit 61,00,000 39,00,000 Operating expenses 34,40,000 28,40,000 Operating income 26,60,000 10,60,000 Less: Pertaining to discontinued Business -4,30,000 -3,30,000 Operating income from continuing operations 30,90,000 13,90,000 Income tax expense 9,27,000 4,17,000 a Net income from Continuing operations 21,63,000 9,73,000 Gain/ Loss On Sale of Division Sale value of Divison 51,80,000 Less: Book Value 45,20,000 Gain on sale of division 6,60,000 — Loss on operation of discontinued division -4,30,000 -3,30,000 Net profit/ (Loss) of Discontinued operation 2,30,000 -3,30,000 Income tax expense 69,000 -99,000 b Net profit/ (Loss) After Tax of Discontinued operation 1,61,000 -2,31,000 a+b Net income $ 23,24,000 $ 7,42,000
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