Due to the decline in popularity of board games, on February 1, 2019 the management of Toystore Inc. made the decision to sell its games division. Management launched an immediate search for possible buyers, and a consultant was hired to facilitate a quick sale. The estimated cost to sell the plant assets as of February1 is $140,000. Management is continuing to operate the division until a buyer is found, but is hopeful that another company will buy out the division before the companys May 31st year end, or at least by July 1, 2019 when the Christmas production run begins.

The net assets for the games division as of February 1, 2019 were as follows:

	Net Book Value	Fair Value
Inventory	560,000	490,000
Production Equipment (net)	4,700,000	4,650,000
Accounts Payable	(630,000)	(630,000)

At the end of May, a buyer for the division still had not been found. Consequently, Toystore's management had an independent appraiser come in to re-evaluate the fair value of the equipment and inventory. The new recoverable amount for the inventory was 370,000 and the net production equipment including costs to sell had a value of $4,560,000.

After tax net income without the games division was $ 7,820,000 at Toystore's May 31, 2019 fiscal year end. The games division recorded a $685,000 operating loss before taxes for the fiscal year.

The companys income tax rate is 40%.

Required:

• (A) The games division qualifies for reporting as a discontinued operation. Prepare all the appropriate journal entries for the 2019 fiscal year.
• (B) Calculate the total net income for the discontinued games division as of the May 31, 2019 year end.