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 $ 15,200,000 $ 9,800,000

Cost of goods sold 9,300,000 6,100,000

Gross profit 5,900,000 3,700,000

Operating expenses 3,280,000 2,680,000

Operating income 2,620,000 1,020,000

Gain on sale of division 620,000 —

3,240,000 1,020,000

Income tax expense 972,000 306,000

Net income $ 2,268,000 $ 714,000


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 $5,060,000. Book value of the division’s assets was $4,440,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:


2018 $410,000

2017 $310,000


Assume an income tax rate of 30%.


Required:

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, 2018, 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 $5,060,000. 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, 2018, 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 $3,920,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures