Check my work Problem 4-2 Discontinued operations [LO4-4) The following condense
ID: 2337186 • Letter: C
Question
Check my work Problem 4-2 Discontinued operations [LO4-4) The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2018 and 2017: $15,800,000 $10,400,000 9,600,000 6,400,000 6,200,000 4,000,000 3.520,0002,920,000 2,680, 000 1,080,000 680,000 680 3,360,000 1,080,000 432,000 2,016,000648,000 Sales Cost of goods solod Gross profit Operating income Gain on sale of division 1.344,000 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 $5,240,000. Book value of the division's assets was $4,560,000. The division's contribution to Jckson's operating income before-tax for each year was as follows: 2018 $440,000 2017 $340,000Explanation / Answer
Req 1 JACKSON HOLDING COMPANY Comparative Income Statements (in part) For the Years Ended December 31 2018 2017 Income from continuing operations before income taxes [1] $2,240,000 $740,000 Income tax expense 896,000 296,000 Income from continuing operations 1,344,000 444,000 Discontinued operations: Income from operations of discontinued component (including gain on disposal of $680,000 in 2018) [2] 1,120,000 340,000 Income tax expense 448,000 136,000 Income (loss) on discontinued operations 672,000 204,000 Net Income $2,016,000 $648,000 [1] Income from continuing operations before income taxes: 2018 2017 Unadjusted $2,680,000 $1,080,000 Less: Income from discontinued operation -440,000 -340,000 Adjusted $2,240,000 $740,000 [2] Income from discontinued operations: 2018 2017 Operating income $440,000 $340,000 Gain on disposal 680,000 - Total $1,120,000 $340,000 Req 2 The 2018 income from discontinued operations would include only the operating income of $440,000. Since no impairment loss is indicated ($5,240,000 – 4,560,000 = $680,000 anticipated gain), none is included. The anticipated gain on disposal is not recognized until it is realized, presumably in the following year. JACKSON HOLDING COMPANY Comparative Income Statements (in part) For the Years Ended December 31 2018 2017 Income from continuing operations before income taxes [1] $2,240,000 $740,000 Income tax expense 896,000 296,000 Income from continuing operations 1,344,000 444,000 Discontinued operations: Income from operations of discontinued component 440,000 340,000 Income tax expense 176,000 136,000 Income (loss) on discontinued operations 264,000 204,000 Net Income $1,608,000 $648,000 Req 3 The 2018 income from discontinued operations would include the operating income of $440,000 as well as an impairment loss of $580,000 ($4,560,000 book value of assets less $3,980,000 fair value). JACKSON HOLDING COMPANY Comparative Income Statements (in part) For the Years Ended December 31 2018 2017 Income from continuing operations before income taxes [1] $2,240,000 $740,000 Income tax expense 896,000 296,000 Income from continuing operations 1,344,000 444,000 Discontinued operations: Income from operations of discontinued component -140,000 340,000 Income tax expense -56,000 136,000 Income (loss) on discontinued operations -84,000 204,000 Net Income $1,260,000 $648,000 Note: please change the sign of income tax expense in req 3 if there is any mismatch showing.