PLEASE HELP. !!!!
Baird Manufacturing Company (BMC) was started when it acquired $95,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $55,200. BMC also incurred $87,400 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, BMC made 4,600 units of product and sold 3,600 units at a price of $37.00 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 BMC provides an incentive bonus to the company president equal to 11 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 companys income tax expense.
Baird Manufacturing Company (BMC) was started when it acquired $95,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $55,200. BMC also incurred $87,400 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, BMC made 4,600 units of product and sold 3,600 units at a price of $37.00 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 BMC provides an incentive bonus to the company president equal to 11 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. Reg B ReqC Req D Req A1 Inc Req A1 Bal Req A2 Inc Req A2 Bal Stmt Sheet Stmt Sheet Req A1 Bal Sheet Prepare a GAAP-based Income statement for Option 1. BAIRD MANUFACTURING COMPANY Income Statement Cost of goods sold 0 $ ROQ Aline Stmi Req A1 Bal Sheet > Complete this question by entering your answer in the tabs below. Req A1 Inc Stmt Req A1 Bal Sheet Req A2 Inc Stmt Req A2 Bal Sheet Reg B Reqc Reg D Prepare a GAAP-based balance sheet for Option 1. BAIRD MANUFACTURING COMPANY Balance Sheet Assets Total assets $ 0 Equity Total equity $ Complete this question by entering your answer in the tabs below. Req A1 Inc Stmt Req A1 Bal Sheet Req A2 Inc Stmt Req A2 Bal Sheet Reg B Reg C Reg D Prepare a GAAP-based income statement for Option 2. BAIRD MANUFACTURING COMPANY Income Statement Complete this question by entering your answer in the tabs below. ReqB Reqc Req D Reg A1 Inc Req A1 Bal Reg A2 Inc Req A2 Bal Stmt Sheet Stmt Sheet Prepare a GAAP-based balance sheet for Option 2. BAIRD MANUFACTURING COMPANY Balance Sheet Assets $ 0 Total assets Equity Total equity $ Complete this question by entering your answer in the tabs below. Req A1 Inc Stmt Req A1 Bal Sheet Req A2 Inc Stmt Req A2 Bal Sheet Reg B ReqC ReqD Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors. The option most favorable to investors and creditors Complete this question by entering your answer in the tabs below. Req A1 Inc Stmt Req A1 Bal Sheet Reg A2 Inc Stmt Reg A2 Bal Sheet ReqB Reqc Reg 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. (Round your answers to the nearest whole dollar) 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
