On July 31, 2020, Lee Co. a public company decides to put one of the divisions...

 

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On July 31, 2020, Lee Co. a public company decides to put one of the divisions up for sale so that it can focus on further developing its other division. The capital assets of the division up for sale (recorded to the PPE account), were purchased January 1, 2016 with an original cost of $990,000. The annual depreciation is $33,000. The fair value of the building on July 31, 2020 was $840,000. The costs to sell were $12,000. The income statement on December 31, 2020 of the entity before any adjustments for the asset held for sale was as follows: $8,600,000 $3,500,000 $1,000,000 $240,000 $1,200,000 $798,000 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense Net income 1,862,000 The income statement details for the asset held for sale is as follows: $3,200,000 $1,600,000 $300,000 $33,000 $400,000 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense $260,100 $606,900 Net income Required: (a) Prepare the journal entries to record the depreciation for the PPE and their reclassification as held for sale in 2020. Assume value in use is lower than net realizable value. (b) Prepare a revised statement of income for the year ended December 31, 2020 in good form. On July 31, 2020, Lee Co. a public company decides to put one of the divisions up for sale so that it can focus on further developing its other division. The capital assets of the division up for sale (recorded to the PPE account), were purchased January 1, 2016 with an original cost of $990,000. The annual depreciation is $33,000. The fair value of the building on July 31, 2020 was $840,000. The costs to sell were $12,000. The income statement on December 31, 2020 of the entity before any adjustments for the asset held for sale was as follows: $8,600,000 $3,500,000 $1,000,000 $240,000 $1,200,000 $798,000 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense Net income 1,862,000 The income statement details for the asset held for sale is as follows: $3,200,000 $1,600,000 $300,000 $33,000 $400,000 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense $260,100 $606,900 Net income Required: (a) Prepare the journal entries to record the depreciation for the PPE and their reclassification as held for sale in 2020. Assume value in use is lower than net realizable value. (b) Prepare a revised statement of income for the year ended December 31, 2020 in good form.