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discontinued operation

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 $16,900,000 $11,500,000
Cost of goods sold 10,150,000 6,950,000
Gross profit 6,750,000 4,550,000
Operating expenses 3,960,000 3,360,000
Operating income 2,790,000 1,190,000
Gain on sale of division 790,000 —
3,580,000 1,190,000
Income tax expense 716,000 238,000
Net income $ 2,864,000 $ 952,000

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 $5,570,000. Book value of the division’s assets was $4,780,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:

2018 $495,000
2017 $395,000

Assume an income tax rate of 20%.


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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