Gibson Manufacturing Company (CMC) was started when it acquired $94,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $57,200. CMC also incurred $79,200 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, CMC made 4,400 units of product and sold 3,600 units at a price of $39.00 each. All transactions were cash transactions Required a-1. Prepare an income statement and balance sheet under option 1. a-2. Prepare an 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 c. Assume that CMC provides an incentive bonus to the company president equal to 10 percent of net income. Compute the amount d. Assume a 30 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the creditors. of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. option that minimizes the amount of the company's income tax expense. Prepare a GAAP-based income statement for Option 1 GIBSON MANUFACTURING COMPANY Income Statement 3,600 140,400 (136,800) Sales revenue Cost of goods sold Gross margin Depreciation expenses Selling, General and Administrative expenses Net income $ (136,800) Prepare a balance sheet for Option 1 GIBSON MANUFACTURING COMPANY Balance Sheet Assets Cash Finished goods inventory Total assets Equity Equity shares Common stock Retained earnings Total equity GIBSON MANUFACTURING COMPANY Income Statement Sales revenue Cost of goods sold Gross margin 0 Net income 0 GIBSON MANUFACTURING COMPANY Balance Sheet Assets Cash Finished goods inventory Total assets 0 Equity Common stock Retained earnings Total equity 0 The option most favorable to investors and creditors Option 2 Option no. 1 bonus Option no. 2 bonus The option that provides the president with the higher bonus Option no. 1 income tax expense Option no. 2 income tax expense The option that minimizes the amount of the company's income tax expense