Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020: 2021 2020 Sales

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020:

2021 2020
Sales revenue $ 15,000,000 $ 9,600,000
Cost of goods sold 9,200,000 6,000,000
Gross profit 5,800,000 3,600,000
Operating expenses 3,200,000 2,600,000
Operating income 2,600,000 1,000,000
Gain on sale of division 600,000
3,200,000 1,000,000
Income tax expense 800,000 250,000
Net income $ 2,400,000 $ 750,000

On October 15, 2021, 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, 2021, for $5,000,000. Book value of the divisions assets was $4,400,000. The divisions contribution to Jacksons operating income before-tax for each year was as follows:

2021 $400,000
2020 $300,000

Assume an income tax rate of 25%. Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line.) 1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. 2. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the divisions assets on December 31 was $5,000,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. 3. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the divisions assets on December 31 was $3,900,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Practical Approach

Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren

3rd Canadian edition

1-119-40285-5, 111940276X, 978-1119566007

More Books

Students also viewed these Accounting questions

Question

LO5 Explain how to generate effective recruitment advertisements.

Answered: 1 week ago