The Kinston Company is a retail company that began operations on October 1, Following is the chart of accounts for The Kinston Company. As a new business 2018, when it incorporated in the state of North Carolina. The Kinston Company isall beginning balances are S0 authorized to issue 200,000 shares of $1 par value common stock and 80,000 shares of 2%, $60 par value preferred stock. The company sells a product that includes a one-year warranty and records estimated warranty payable each month. Customers are charged a 6% state sales tax. The company uses a perpetual inventory system. There are three employees that are paid a monthly salary on the last day of the month. EE (Click the icon to view the chart of accounts.) The Kinston Company completed the following transactions during the last quarter of 2018, its first year of operations (Click the icon to view the transactions.) Read the requirements Requirement 1a. In preparation for recording the transactions, prepare: An amortization schedule for the first 3 months of the mortgage payable issued on October 1 Round interest calculations to the nearest dollar Principal Beginning Total Ending Interest Payment Payment Balance Expense Balance 10/01/2018 11/1/2018 12/1/2018 01/01/2019 The Tusquittee Company Chart of Accounts Cash Merchandise Inventory Land Building Store Fixtures Accumulated Depreciation Accounts Payable Employee Income Taxes Payable FICA-OASDI Taxes Payable FICA-Medicare Taxes Payable Employee Health Insurance Pay Federal Unemployment Taxes Payable State Unemployment Taxes Payable Dividends Payable-Commorn Notes Payable Mortgages Payable Common Stock-$1 Par Value Paid-in Capital in Excess of Par-Common Paid-in Capital from Treasury Stock Transactions Retained Earnings Treasury Stock-Common Cash Dividends Sales Revenue Cost of Goods Sold Salaries Expense Payroll Tax Expense able Oct. 1 Issued 36,000 shares of $1 par value common stock for cash of $8 per share 1 Issued a S320,000, 10-year 12% mortgage payable for land with an existing store building. Mortgage payments of $4,000 are due on the first day of each month, beginning November 1 The assets had the following market values: Land, $60,000; Building, $260,000. 1 Issued a one-year, 6% note payable for $11,200 for store fixtures. The principal and interest are due October 1, 2019 3 Purchased merchandise inventory on account from Foremost Supply for $134,000, terms n/30 15 Paid $150 for utilities. 31 Recorded cash sales for the month of $160,000 plus sales tax of 6%. The cost of the goods sold was $96,000 and estimated warranty payable was 10%. 31 Recorded October payroll and paid employees. 31 Accrued employer payroll taxes for October. Nov. 1 Paid the first mortgage payment. 3 Paid Foremost Supply for the merchandise inventory purchased on October 3. 10 Purchased merchandise inventory on account from Foremost Supply for $130,000, terms n/30. 12 Purchased 900 shares of treasury stock for $20 per share. 15 Paid all liabilities associated with the October 31 payroll. 15 Remitted (paid) sales tax from October sales to the state of North Carolina 16 Paid $7,000 to satisfy warranty claims. 17 Declared cash dividends of $1 per outstanding share of common stock. 18 Paid $345 for utilities. 27 Paid the cash dividends. 30 Recorded cash sales for the month of $180,000 plus sales tax of 6%. The cost of the goods sold was $108,000 and estimated warranty payable was 10%. 30 Recorded November payroll and paid employees. 30 Accrued employer payroll taxes for November Dec. 1 10 12 15 Paid the second mortgage payment. Paid Foremost Supply for the merchandise inventory purchased on November 10. Paid $7,900 to satisfy warranty claims. Sold 250 shares of treasury stock for $24 per share. 1. In preparation for recording the transactions, prepare An amortization schedule for the first 3 months of the mortgage payable issued on October 1 Round interest calculations to the nearest dollar a. b. Payroll registers for October, November, and December. All employees worked October 1 through December 31 and are subject to the following FICA taxes: OASDI 6.2% on first $118,500 earned: Medicare: 1.45% up to $200,000, 2.35% on earnings above $200,000 Additional payroll information includes Monthly Federal Salary Health Income Tax Insurance Employee 1,650 $ 960 420 320 320 320 Keirsten Jenning $5,500 $ Mabel Silva 4,800 Selma Morgan Calculations for employer payroll taxes liabilities for October, November, and December: OASDI 6.2% on first $118,500 earned: Medicare: 1.45%; SUTA: 5.4% on first $7,000 earned; FUTA: 0.6% on first $7,000 earned 2,800 c. 2. 3. 4. Record the transactions in the general journal. Omit explanations Post to the general ledger Record adjusting entries for the three month period ended December 31, 2018 a. Depreciation on the Building, straight-line, 40 years, no residual value b. Depreciation on Store Fixtures, straight-line, 20 years, no residual value c. Accrued interest expense on the note payable for the store fixtures d. Accrued interest expense on the mortgage payable e. Accrued income tax expense of $38,000 Post adjusting entries and prepare an adjusted trial balance Prepare a multi-step income statement and statement of retained earnings for the quarter ended December 31, 2018.Prepare a classified balance sheet as of December 31, 2018. Assume that 5. 6. 6. Prepare a multi-step income statement and statement of retained earnings for the quarter ended December 31, 2018. Prepare a classified balance sheet as of December 31, 2018. Assume that $10,349 of the mortgage payable is due within the next year. 7. Evaluate the company.'s success for the first quarter of operations by calculating the following ratios. The market price of the common stock is $40 on December 31, 2018. Round to two decimal places a. Times interest earned b. Debt to equity C. Earnings per share d. Pricelearnings ratio e. Rate of return on common stock 8. The Kinston Com pany wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $200,000 in 2019 and that the expansion will provide additional operating income of $70,000 in 2019. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 30% income tax rate Plan 1: Issue 25,000 additional shares of common stock for $16 per share Plan 2: Issue $140,000 in 15-year, 16% bonds payable Which option will contribute more net income in 2019? Which option provides the highest EPS