Chamlite
Essay by review • May 22, 2011 • Essay • 672 Words (3 Pages) • 1,660 Views
Question 1
Chemalite, Inc.
Summary of Transactions
Jan. 2, 2003 through June 30, 2003
Date Cash Patent Machinery & Equipment Inventory Owner's Equity
Jan. 2 +125,000 +125,000 : Common Stock
Jan. 2 +375,000 +375,000 : Common Stock
Jan. 15 -7,500 -7,500 : Incorporation Expenses
Jun. 15 -62,500 +62,500 : Building the Machinery
Jun. 24 -75,000 +75,000 : Purchase of Plastics and Chemicals
Total 230,000 62,500 75,000 367,500
Question 2
Chemalite, Inc.
Income Statement
Jan. 2, 2003 through June 30, 2003
Revenue
Fees earned $0
Expenses
Operating expenses:
Incorporation expenses -7500
Depreciation expense (patent) -12,500
Total operating expenses -20,000
Net income -20,000
The company did incur a loss as Mr. Larson suggested. However, the loss is not $145,000; the loss, which is due to incorporation expenses and the patent depreciation expense, is only $20,000. Mr. Larson did not recognize the building of the machinery and the purchase of the inventory as investments.
Question 3
a.
Chemalite, Inc.
Balance Sheet
Jan. 2, 2003 through June 30, 2003
Assets
Cash $230,000
Equipment & Machinery $62,500
Inventory $75,000
Patent $125,000
Less Depreciation -12,500
Net Patent $112,500
Total assets $480,000
Liabilities $0
StockholderÐŽ¦s equity
Common stock $500,000
Retained earnings -20,000
Total liabilities and stockholderÐŽ¦s equity $480,000
Question 3
b.
Chemalite, Inc.
Statement of Cash Flows
Jan. 2, 2003 through June 30, 2003
Cash flows from operating activities:
Deduct cash payment for incorporation costs -7,500
Deduct cash payment for depreciation of patent -12,500
Net cash flow from operating activities -20,000
Cash flows from investing activities:
Cash payment for net patent -112,500
Cash payment for building machinery -62,500
Cash payment for purchasing supplies/inventory -75,000
Net cash flow from investing activities -250,000
Cash flows from financing activities:
Cash received from issuing common stock $375,000
Cash provided for purchase of patent $125,000
Net cash flow from financing activities $500,000
Net increase in cash
Jan 1 2003 cash balance $0
June 30 2003 cash balance $230,000
Question 4
a.
Chemalite, Inc.
Income Statement
For the Year Ended December 31 2003
Fees earned
Total Sale $754,500.00
COGS -545,000.00
Gross Profit $209,500.00
Operating expenses
Fees Paid -7,500.00
Marketing Expense -22,500.00
Consulting Fees -23,750.00
Salaries -80,000.00
Depreciation On Machinery -10,625.00
Depreciation On Patent -25,000.00
Interest -750.00
Total operating expenses
-170,125.00
Net Profit 39,375.00
Question 4
b.
Chemalite, Inc.
Balance Sheet
December 31 2003
...
...