Motor Corporation's Income Statements for the Years Ended December 31

question 7

Essay

Motor Corporation's income statements for the years ended December 31, 2012 and 2011 included the following information before adjustments:
$\begin{array}{|l|l|l|}\hline & 2012 & 2011 \\\hline \text { Operating income } & \$ 900,000 & \$ 600,000 \\\hline \text { Gain on sale of division } & 450,000 & --0-- \\\hline & \$ 1,350,000 & \$ 600,000 \\\hline \text { Provision for income taxes } & (405,000) & (180,000) \\\hline \text { Net income } & \$ 945,000 & \$ 420,000 \\\hline & & \\\hline\end{array}$
On January 1, 2012, Motor Corporation agreed to sell the assets and product line of one of its operating divisions for $1,600,000. The sale was consummated on December 31, 2012, and it resulted in a gain on disposition of $450,000. This division's pre-tax net losses were $320,000 in 2012 an $250,000 in 2011. The income tax rate for both years was 30%.
Required:
Starting with operating income (before tax), prepare revised comparative income statements for 2012 and 2011 showing appropriate details for gain (loss) from discontinued operations.

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Definitions:

Counting System

A method or set of rules used for quantifying objects, typically involving numbers and operational symbols.

Body Parts

Structures that make up the anatomy of living organisms, including humans and animals.

Miller's Study

A significant psychological research conducted by George A. Miller in 1956, focusing on the limits of our capacity for processing information, notably finding that humans can hold about 7 (plus or minus 2) items in their working memory.

One-One Principle

A fundamental principle of counting that states each object being counted must be assigned one, and only one, number to represent it.