Munnster Corporation’s income statements for the years ended December 31, 20X2 and 20X1, included the following information before adjustments:

On January 1, 20X2, Munnster Corporation agreed to sell the assets and product line of one of its operating divisions for $2,000,000. The sale was consummated on December 31, 20X2, and it resulted in a pre-tax gain on disposition of $350,000. This division’s pre-tax net losses were $505,000 in 20X2 and $170,000 in 20X1. The income tax rate for both years was 21%.

Required:

Starting with operating income (before tax), prepare revised comparative income statements for 20X2 and 20X1 showing appropriate details for gain (loss) from discontinued operations.

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20X2 20X1 $ 900,000 350,000 Operating income $750,000 Gain on sale of division 1,250,000 (262,500) 750,000 Provision for income taxes (157,500) Net income $ 987,500 $592,500