Prepare an income statement for the year ended december

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Question - Sahar Inc. is a publicly traded company. After consultation with several experts, Sahar Inc. decided to discontinue one of its major lines of business on October 31, 2021. The following information is provided about the heavy machinery which was used in the line of business to be discontinued:

Original cost of the machinery $1,500,000

Depreciation method: double declining balance method

Estimated useful life of the Machinery since the date of purchase 15 years

Date of purchase of the Machinery May 1, 2019

Fair value on October 31, 2021 $1,000,000

Costs to sell the Machinery $10,000

The results of the company's operation in 2021 shows $950,000 revenue, which includes $210,000 revenue generated by the discontinued line of business. During 2021, the company had $480,000 total expenses of which $120,000 were incurred by the discontinued line of business (before recording depreciation and impairment loss).

Required -

1) Prepare all the journal entries necessary to reclassify the machinery as held-for-sale in 2021.

2) Prepare an Income Statement for the year ended December 31, 2021. Tax rate is 25%.

Reference no: EM133133567

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