Reference no: EM131789124

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 2027, or
Plan 2: Issue 100,000 common shares at $100 per share.
The expansion is expected to generate additional annual profit before interest and tax of $800,000. ZedCon's tax rate is 35%. The assumed adjusted trial balance at December 31, 2018, one year after the expansion under each of Plan 1 and Plan 2, is shown below:

Required:

1. Prepare a single-step income statement for 2018 (showing salaries expense, depreciation expense, cost of goods sold, interest expense, and other expenses) and a classified balance sheet at December 31, 2018, assuming:

a. Plan 1, and then
b. Plan 2.

2. Which financing plan should ZedCon Inc. choose assuming its goal is to:

a. Maximize earnings per share, or
b. Maximize profit.

Explain your answers showing any relevant calculations (rounded to the nearest whole cent).