The following condensed income statements of the jackson holding company are presented for the two years ended december 31, 2016 and 2015:
2015 2015
sales 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 1000 000
gain on sale of division 600 ,000 -
income tax expenses 1, 280, 000 400, 000
net income 1, 920 ,000 600 ,000
on october 15, 2016, 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, 2016, for $5,000,000. book value of the division’s assets was $4,400,000. the division’s contribution to jackson’s operating income before-tax for each year was as follows:
2016 $400,000 loss
2015 $300,000 loss
assume an income tax rate of 40%.
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.)
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