Chapter 10 Homework 5 30 points eBook Print O References Gibson Manufacturing Company (GMC) was started when it acquired $91,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $56,000. GMC also incurred $56,000 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, GMC made 4,000 units of product and sold 3,500 units at a price of $36.00 each. All transactions were cash transactions Required a-1. Prepare a GAAP-based income statement and balance sheet under option 1. a-2. Prepare a GAAP-based income statement and balance sheet under option 2. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors. c. Assume that GMC provides an incentive bonus to the company president equal to 15 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Req A1 Income Statement Req A2 Income Statement Prepare a GAAP-based Income statement for Option 1. GIBSON MANUFACTURING COMPANY Saved Req A1 Balance Sheet Req A2 Balance Sheet Income Statement Req B Req C Req D M Help Save & Exit S Check my w

also incurred $56,000 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classifled. Advocates of Option ibelieve that the costs should be classified as general, selling. and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and plarning costs as pioduct costs: Daring the year, GMC made 4.000 units of product and sold 3,500 units at a price of $36.00 each. All transactions were cash transections. Required a-1. Prepare a GAAP. based income statement and balance sheot under option 1 a-2. Prepare a GAMP-based income-statement and balance sheet under option 2 . b. Identify the option that resuits in financial statements that gre more thely fo leave a favorable impression on investors and creditors. c. Assume that GMC provides an incentive bonus to the compary president equal to 15 percent of net income Compute the amount of the bonus under each of the two options identily the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rote. Determine the amount of income tax expense under each of the fwro options. Identify the option that atinimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Identify the option that resuits in financiat statements that are more likely to leave a favorable impression on investors and creditors. c. Assume that GMC provides an incentive bonus to the company president equal to 15 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. identify the option that minimizes the amount of the company's income tax expense: Complete this question by entering your answer in the tabs below. Prepare a GAMp-based batance sheet for Option 2. c. Assume that GMC provides an incentive bonus to the company president equal to 15 percent of net income. Compute the amount of the bonus undec each of the two options. Identify the option that provides the president with the higher bonus d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Prepare a GAAP-based balance sheet for Option 1. Required a-1. Prepare a GAAP.based income statement and balance sheet under option 1. a-2. Prepare a GAAP.based income statement and balance sheet under option 2 . b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditocs. c. Assume that GMC provides an incentive bonus to the compary president equal to 15 percent of net income Compute the amou of the bonus under each of the two options, Identify the option that provides the president with the higher bonus. d. Assume a 35 pescent income tax fate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the compary's income tox expense Complete this question by entering your answer in the tabs below. Assume that GMC provides an incentive bonus to the company president equal to 15 percent of net income, Compute the amount of the bonus under each of the two options. Identify the option that ptovides the president with the higher bonus. Note: Round your-answers to the nearest whole dollar. Negative amounts should be entered with a minus sign. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors. c. Assume that GMC provides an incentive bonus to the company president equal to 15 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options, Identify the option that minimizes the amount of the company's income tax expense Complete this question by entering your answer in the tabs below. Prepare a GMAP-based income statement for Option 2. made 4, 000 units of product and sold s,s00 units at a price of $30,00 each. Air transactions were cash transactions. Required a-1. Prepare a GAAP.based income statement and bolance sheet under option 1. a-2. Prepare a GAAP-based income statement and balance sheet under option 2. b. Identify the option that results in financial stalements that are more likely to loavo a favorable improssion on imvestors and creditors. c. Assume that GMC plowides an incentive bonus to the compary president equat to 15 percent of net income. Compute the amoun of the bonus under each of the two options. Identify the option that provides the president with the higher bonus d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. identify the option that minimizes the amount of the company's income tax expense, Complete this question by entering your answer in the tabs below. Assume a 35 percent income tax rate: Determine the ampunt of income tax expense under each of the two options. Identify the option that minimizes the amount of the compary's incorne tax expense. Note: Aound your answers to the nearest whole dollar. Gibson Manufacturing Compamy (GMC) was started when at accuired $91,000 by issuing common stock. During the first year of. Advocates of Optian 2 beleve it is more epproptiate to classify the design and planming costs as product costs. During the year GiAC made 4,000 units of product and sold 3,500 anits at a pice of $36,00 each All vansactions were cash transactions Pequired a-1. Piepare a GAMP bassed income statemerk and balance sheet under opton 1 a.2. Prepare a GAAP-based income statement and balance sheet under option? creditor: of the bonus under each of the two options identify the opton that provides the president with the higher bonus d. Assume a 35 pescent incone tax rate Delermine the amount of income fax expense under each af the two options identif the option that mirvizes the amount of the compary/s income lar erpense Complete this question br entering your answer in the tabs below. Prepsit a GAMP-based mome statement for Optian 1