Question
In: Accounting
The following condensed income statements of the Jackson Holding Company are presented for the two years...
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 | $ | 16,600,000 | $ | 11,200,000 | ||
| Cost of goods sold | 10,000,000 | 6,800,000 | ||||
| Gross profit | 6,600,000 | 4,400,000 | ||||
| Operating expenses | 3,840,000 | 3,240,000 | ||||
| Operating income | 2,760,000 | 1,160,000 | ||||
| Gain on sale of division | 760,000 | — | ||||
| 3,520,000 | 1,160,000 | |||||
| Income tax expense | 880,000 | 290,000 | ||||
| Net income | $ | 2,640,000 | $ | 870,000 | ||
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 $5,480,000. Book value of the division’s
assets was $4,720,000. The division’s contribution to Jackson’s
operating income before-tax for each year was as follows:
| 2021 | $480,000 |
| 2020 | $380,000 |
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 division’s assets on December 31 was $5,480,000.
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 division’s assets on December 31 was $4,060,000.
Prepare revised income statements according to generally accepted
accounting principles, beginning with income from continuing
operations before income taxes. Ignore EPS disclosures.
|
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Solutions
Expert Solution
| Answer 1. | ||
| JACKSON HOLDING COMPANY | ||
| Comparitive Income Statements (in part) | ||
| For the Years Ended December 31 | ||
| 2021 | 2020 | |
| Income from continuing operations before income taxes | 3,240,000.00 | 1,540,000.00 |
| Income tax Benefit (expense) - 25% | (810,000.00) | (385,000.00) |
| Income from continuing operations | 2,430,000.00 | 1,155,000.00 |
| Discontinued Operations Gain (Loss) | 280,000.00 | (380,000.00) |
| Income tax Benefit (expense) - 25% | (70,000.00) | 95,000.00 |
| Income (Loss) from operations of discontinued Component | 210,000.00 | (285,000.00) |
| Net Income | 2,640,000.00 | 870,000.00 |
| 2021 | 2020 | |
| Income from continuing operations before income taxes: | ||
| Unadjusted | 2,760,000.00 | 1,160,000.00 |
| Add: Loss from from Discontinued Operations | (480,000.00) | (380,000.00) |
| Adjusted | 3,240,000.00 | 1,540,000.00 |
| 2021 | 2020 | |
| Income from Discontinued Operations: | ||
| Operating Income | (480,000.00) | (380,000.00) |
| Gain on Disposal | 760,000.00 | - |
| Total | 280,000.00 | (380,000.00) |
| Answer 2. | ||
| JACKSON HOLDING COMPANY | ||
| Comparitive Income Statements (in part) | ||
| For the Years Ended December 31 | ||
| 2021 | 2020 | |
| Income from continuing operations before income taxes | 3,240,000.00 | 1,540,000.00 |
| Income tax Benefit (expense) - 25% | (810,000.00) | (385,000.00) |
| Income from continuing operations | 2,430,000.00 | 1,155,000.00 |
| Discontinued Operations Gain (Loss) | (480,000.00) | (380,000.00) |
| Income tax Benefit (expense) - 25% | 120,000.00 | 95,000.00 |
| Income (Loss) from operations of discontinued Component | (360,000.00) | (285,000.00) |
| Net Income | 2,070,000.00 | 870,000.00 |
| Answer 3. | ||
| JACKSON HOLDING COMPANY | ||
| Comparitive Income Statements (in part) | ||
| For the Years Ended December 31 | ||
| 2021 | 2020 | |
| Income from continuing operations before income taxes | 3,240,000.00 | 1,540,000.00 |
| Income tax Benefit (expense) - 25% | (810,000.00) | (385,000.00) |
| Income from continuing operations | 2,430,000.00 | 1,155,000.00 |
| Discontinued Operations Gain (Loss) | (1,140,000.00) | (380,000.00) |
| Income tax Benefit (expense) - 25% | 285,000.00 | 95,000.00 |
| Income (Loss) from operations of discontinued Component | (855,000.00) | (285,000.00) |
| Net Income | 1,575,000.00 | 870,000.00 |
| 2021 | 2020 | |
| Income from Discontinued Operations: | ||
| Operating Income | (480,000.00) | (380,000.00) |
| Impairment Loss ($4,060,000 - $4,720,000) | (660,000.00) | - |
| Total | (1,140,000.00) | (380,000.00) |
ekkarill92 answered 2 years agoRelated Solutions
The following condensed income statements of the Jackson Holding Company are presented for the two years...
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
$
15,700,000
$
10,300,000
Cost of goods sold
9,550,000
6,350,000
Gross profit
6,150,000
3,950,000
Operating expenses
3,480,000
2,880,000
Operating income
2,670,000
1,070,000
Gain on sale of division
670,000
—
3,340,000
1,070,000
Income tax expense
835,000
267,500
Net income
$
2,505,000
$
802,500
On October 15, 2021, Jackson entered into a tentative agreement to
sell...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
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
$
16,600,000
$
11,200,000
Cost of goods sold
10,000,000
6,800,000
Gross profit
6,600,000
4,400,000
Operating expenses
3,840,000
3,240,000
Operating income
2,760,000
1,160,000
Gain on sale of division
760,000
—
3,520,000
1,160,000
Income tax expense
880,000
290,000
Net income
$
2,640,000
$
870,000
On October 15, 2021, Jackson entered into a tentative agreement to
sell...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
The following condensed income statements of the Jackson Holding
Company are presented for the two years ended December 31, 2018 and
2017:
2018
2017
Sales
$
16,800,000
$
11,400,000
Cost of goods sold
10,100,000
6,900,000
Gross profit
6,700,000
4,500,000
Operating expenses
3,920,000
3,320,000
Operating income
2,780,000
1,180,000
Gain on sale of division
780,000
—
3,560,000
1,180,000
Income tax expense
1,424,000
472,000
Net income
$
2,136,000
$
708,000
On October 15, 2018, Jackson entered into a tentative agreement to
sell the...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
The following condensed income statements of the Jackson Holding
Company are presented for the two years ended December 31, 2018 and
2017:
2018
2017
Sales
$
16,800,000
$
11,400,000
Cost of goods sold
10,100,000
6,900,000
Gross profit
6,700,000
4,500,000
Operating expenses
3,920,000
3,320,000
Operating income
2,780,000
1,180,000
Gain on sale of division
780,000
—
3,560,000
1,180,000
Income tax expense
1,424,000
472,000
Net income
$
2,136,000
$
708,000
On October 15, 2018, Jackson entered into a tentative agreement to
sell the...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
The following condensed income statements of the Jackson Holding
Company are presented for the two years ended December 31, 2018 and
2017:
2018
2017
Sales
$
16,800,000
$
11,400,000
Cost of goods sold
10,100,000
6,900,000
Gross profit
6,700,000
4,500,000
Operating expenses
3,920,000
3,320,000
Operating income
2,780,000
1,180,000
Gain on sale of division
780,000
—
3,560,000
1,180,000
Income tax expense
1,424,000
472,000
Net income
$
2,136,000
$
708,000
On October 15, 2018, Jackson entered into a tentative agreement to
sell the...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
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
$
15,900,000
$
10,500,000
Cost of goods sold
9,650,000
6,450,000
Gross profit
6,250,000
4,050,000
Operating expenses
3,560,000
2,960,000
Operating income
2,690,000
1,090,000
Gain on sale of division
690,000
—
3,380,000
1,090,000
Income tax expense
845,000
272,500
Net income
$
2,535,000
$
817,500
On October 15, 2021, Jackson entered into a tentative agreement to
sell...
The following condensed income statements of the Jackson Holding Company are presented for the two years...
The following condensed income statements of the Jackson Holding
Company are presented for the two years ended December 31, 2018 and
2017:
2018
2017
Sales
$
17,000,000
$
11,600,000
Cost of goods sold
10,200,000
7,000,000
Gross profit
6,800,000
4,600,000
Operating expenses
4,000,000
3,400,000
Operating income
2,800,000
1,200,000
Gain on sale of division
800,000
—
3,600,000
1,200,000
Income tax expense
1,080,000
360,000
Net income
$
2,520,000
$
840,000
On October 15, 2018, Jackson entered into a tentative agreement to
sell the...
The following condensed income statements of the Jackson Holdings company are presented for the two years...
The following condensed income statements of the Jackson
Holdings company are presented for the two years ended December 31,
2021 and 2020.
2021 2020
Sales Revenue $15,900,00 $10,500,000
Cost of goods sold 9,650,000 6,450,000
Gross profit 6,250,000 4,050,000
Operating expenses 3,560,000 2,960,000
operating income 2,690,000 1,090,000
gains on sale of divison 690,000 -
3,380,000 1,090,000
Income tax expenses 845,000 272,500
Net income 2,535,000 817,500
On October 15, 2021 Jackson entered into a tentative agreement
to seel all the assets of...
The following condensed income statements of the Jackson Holdings company are presented for the two years...
The following condensed income statements of the Jackson
Holdings company are presented for the two years ended December 31,
2021 and 2020.
2021 2020
Sales Revenue $15,900,00 $10,500,000
Cost of goods sold 9,650,000 6,450,000
Gross profit 6,250,000 4,050,000
Operating expenses 3,560,000 2,960,000
operating income 2,690,000 1,090,000
gains on sale of divison 690,000 -
3,380,000 1,090,000
Income tax expenses 845,000 272,500
Net income 2,535,000 817,500
On October 15, 2021 Jackson entered into a tentative agreement
to seel all the assets of...
The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020:
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 $ 16,800,000 $ 11,400,000 Cost of
goods sold 10,100,000 6,900,000 Gross profit 6,700,000 4,500,000
Operating expenses 3,920,000 3,320,000 Operating income 2,780,000
1,180,000 Gain on sale of division 780,000 — 3,560,000 1,180,000
Income tax expense 890,000 295,000 Net income $ 2,670,000 $ 885,000
On October 15, 2021, Jackson entered into a tentative agreement to
sell...
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