Part 1 Grindstone Paving started selling products to customers in 2017 in addition to offering paving services. In 2018, the company also started to offer landscaping services. Currently, the owner (John) owns all the shares in the corporation. To raise the needed cash, John decides to offer common and preferred stock for sale to investors starting in 2018. Below is the balance sheet at the end of 2017. Grindstone Paving Inc. Balance Sheet As at December 31, 2017 Assets Liabilities Cash $121,000 Accounts Payable $21,000 Accounts Receivable 25,500 Unearned Revenue 9,000 Prepaid Insurance 7,200 Bank Loan 17,700 Inventory 5,000 Total Liabilities 47,700 Property, Plant & Equipment 55,000 Stockholders' Equity Accumulated Depreciation -32,000 Common Stock - 60,000 issued 60,000 Retained Earnings 74,000 Total Stockholders' Equity 134,000 Total Assets $181,700 Liabilities & Stockholders' Equity $181,700 John has authorized 100,000 common shares and 25,000 preferred shares. The preferred stock will be cumulative and pay $9 dividends. John wants to keep control of his business, so he will keep his 60,000 common shares and will sit on the board of directors. John has located a few private investors that wish to purchase stock in the corporation. Some want common stock, while other are interested in preferred stock. On January 20, 2018, John issues 30,000 common shares for $75,000 cash and issues 7,000 preferred shares for $28,000 cash. On March 1, 2018, Grindstone Paving issued and sold $200,000, 6 year bonds with an interest rate of 7%. The market rate at the time of issue was 8%. Any premium or discount on the bond is amortized using the straight line method. Interest will be paid annually on February 28. Use a 4 decimal factor for the bond calculation. During 2018, the company has performed well, so the board of directors decided to pay dividends. On November 30, 2018, the company declared cash dividends of $90,000, which will be paid out on December 15, 2018. Use the cash dividends method and close cash dividends at the end of the year. Prepare the journal entries for the issue of stock, issue of the bonds and the dividends. Also prepare adjustments at year end to accrue interest on the bond. Part 2 At the end of the year, Grindstone Paving has the following list of accounts and adjusted balances. - The expansion into landscaping services did not go as planned and had to be discontinued. - All balances are normal balances. - Complete the list by filling in the missing values from the journal entries you created during the year. - The cash balance includes all transactions during the year, including the ones you prepared. - Interest expense includes interest accrued on the bond plus interest paid on the bank loan. - Interest payable will only contain interest accrued. Assume the tax rate is 30%. Assume income tax has already been paid. You will just have to calculate the income tax expense on the income statement. Account Title Balance Accounts Payable $122,000 Accounts Receivable 163,508 Accumulated Depreciation 67,000 Bank Loan 50,000 Bonds Payable Cash 132,500 Common Stock Cost of Goods Sold 292,500 Depreciation Expense 35,000 Discount on Bonds Insurance Expense 1,200 Interest Expense 15,218 Interest Payable Inventory 210,160 Loss from Discontinued Operations (10,200) Maintenance Expense 8,000 Preferred Stock Premium on Bonds Prepaid Insurance 14,000 Professional Fees Expense 5,400 Property, Plant & Equipment 200,000 Rent Expense 32,000 Salaries Expense 70,000 Sales Discounts 6,000 Sales Returns and Allowances 7,000 Sales Revenue 650,000 Telephone Expense 3,000 Travel Expense 15,400 Unearned Revenue 26,100 Notes: The bank loan is payable over 5 years and $10,000 will be paid by December 31, 2019. Prepare a multistep income statement for the year ending December 31, 2018. Round answers to the nearest whole number. Calculate the earnings per share for i) Income from Continuing Operations, ii) income from Discontinued Operations and iii) Net Income. Part 3 Prepare a statement of retained earnings at December 31, 2018. Round answers to the nearest whole number. Part 4 Prepare a Classified Balance Sheet at December 31, 2018. Round answers to the nearest whole number.