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The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2016 and 2015:
| |
|
2016 |
|
2015 |
| Sales |
$ |
15,600,000 |
$ |
10,200,000 |
| Cost of goods sold |
|
9,500,000 |
|
6,300,000 |
| |
| Gross profit |
|
6,100,000 |
|
3,900,000 |
| Operating expenses |
|
3,440,000 |
|
2,840,000 |
| |
| Operating income |
|
2,660,000 |
|
1,060,000 |
| Gain on sale of division |
|
660,000 |
|
- |
| |
| |
|
3,320,000 |
|
1,060,000 |
| Income tax expense |
|
996,000 |
|
318,000 |
| |
| Net income |
$ |
2,324,000 |
$ |
742,000 |
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 $5,180,000. Book value of the division's assets was $4,520,000. The division's contribution to Jackson's operating income before-tax for each year was as follows:
| 2016 |
$430,000 |
loss |
| 2015 |
$330,000 |
loss |