ZedCon Inc. intends to raise $10,000,000 for the purpose of expanding operations internationally. Two options are available:
€¢ Plan 1: Issue $10,000,000 of 5% bonds payable due in 2024, or
€¢ Plan 2: Issue 100,000 common shares at $100 per share.
The expansion is expected to generate additional annual income before interest and tax of $800,000. ZedCon€™s tax rate is 35%. The assumed adjusted trial balance at December 31, 2015, one year after the expansion under each of Plan 1 and Plan 2, is shown below:

Required
Preparation Component:
1. Prepare a single-step income statement for 2015 (showing salaries expense, depreciation expense, cost of goods sold, interest expense and other expenses) and a classified balance sheet at December 31, 2015, assuming:
a. Plan 1, and
Then b. Plan 2.
Analysis Component: Which financing plan should ZedCon Inc. choose assuming its goal is to:
a. Maximize earnings per share, or
b. Maximize net income.
Explain your answers showing any relevant calculations (rounded to the nearest wholecent).

Transcribed Image Text:

Account Plan 1 Plan 2 48,000 78,000 202,000 100,000 800,000 5,200 3,200 48,000 78,000 202,000 100,000 800,000 5,200 3,200 0- 150,000 812,800 92,000 Allowance for doubtful accounts Bad debt expense .. 150,000 312,800 92,000 100,000 Common shares (1,000 shares issued and outstanding)**.... Common shares (101,000 shares issued and outstanding)**... 48,000 700 127,000 31,000 273,000 10,100,000 48,000 700 127,000 31,000 273,000 1,050,000 Delivery expense.. 506,100 300 800 300 800 International property, plant and equipment assets.. 10,000,000 10,000,000 32,000 32,000 60,000 14,000 7,000 800 25,600 916,000 59,000 1,400 19,000 32,000 32,000 60,000 14,000 7,000 800 25,600 916,000 59,000 1,400 19,000 Mortgage payable ($14,000 due in 2016).. Salaries expense Sales.