The following condensed statements of the Palmer Holding Company are presented for the two years ended December 31, 2011 and 2010: Sales Cost of goods sold Gross profit Operating expenses Operating income Gain on Sale of Assets Impairment loss on assets of division held for sale 2011 3,000,000 1,840,000 1,160,000 640,000 520,000 10,000 (240,000) 290,000 116,000 2010 2,520,000 1,640,000 880.000 460,000 420,000 Income tax expense (40%) 420,000 168,000 Net income 174,000 252,000 Other relevant information: (1) On December 1, 2011, Palmer entered into a tentative agreement to sell the assets of one its divisions. The division comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the company. The sale is expected to be completed in early 2012. The book value of the division's assets on December 31, 2011 is $1,240,000 and the estimated fair value (net of expected costs to sell) is $1,000,000. The division's contribution to Palmer' operating income before-tax for each year was as follows: 2011 Operating Income: 2010 Operating Loss: $42,000 ($16,000) (2) On July 1, 2011, Palmer decided to dispose of a group of assets that met all of the requirements to classify the group as a long-lived asset to be disposed of by sale. The asset group was not considered a component of the entity under U.S. GAAP. The book value of the asset group was $160,000. The assets were sold on December 1, 2011 for $170,000 (net of selling costs). Required: Prepare revised income statements for 2010 and 2011 according to U.S. GAAP, beginning with income from continuing operations. Assume a tax rate of 40%. You may ignore EPS disclosures. Use the table provided on the next page for your answer and the extra space provided for calculations. 2011 2010 Income from Continuing Operations (Before Tax) Income Tax (at 40%) Income from Continuing Operations Discontinued Operations (Total) Net Income