Chemalite (A)

Group 8
1080644 Jesper van Engelen
1688421 Abdulhadi Abulzahab
1779079 Jozef Appelman
1721712 Sixue Yan
1039725 Simone Cammel

Chemalite Case (A)

QUESTIONS:
1. Prepare the post-production Financial Statements
(Period Jan 2 June 30, 2003)
- Opening Balance
- Income Statement
- Ending Balance
2. Prepare the second half year production Financial Statements
(Period July 1 December 31, 2003)
- Income Statement
- Ending Balance
3. Comments on the business based on above figures

Chemalite
Opening Balance 2 Jan. 2003

Liabilities & Owners Equity

Assets

Cash

375,000

Patent

125,000 Common Stock

500,000

500,000

500,000

Note: Follow the Cash

Chemalite
Income Statement 1H2003
Revenues

Expenses

Net Income

In this (pre-production) period 145,000 is paid for:

- 7,500 legal fees,
- 62,500 building the machine
- 75,000 inventory
These should be treated as investments (not losses)
Note: Accrual Principle: Matching Revenues with Costs

Chemalite
Ending Balance June 30, 2003
Liabilities & Owners Equity

Assets

230,000
Cash
Capitalized Legal
7,500
75,000
Inventory
62,500 Common Stock
Fixed Assets
125,000 Retained Earnings
Patent
500,000

Note: Cash = 375,000 145,000 = 230,000

500,000
0
500,000

Chemalite
Statement of Cash Flows 1H2003
Cash Flows from:

Operations:
- Purchase inventory

75,000

Investing:
- Purchase machinery
- Legal Costs

62,500
7,500

Financing:
- Sale Common Stock

375,000

Increase in Cash
Cash Begin
Cash Ending

230,000
0
230,000

Chemalite
Income Statement 2H2003
Revenues
Expenses:
- Legal Expenses
- Advertising
- Administration
-Manuf. Costs
-Raw Materials *
- R&D
- Interest
-Depreciation FA **
- Amortization P *** note: P only used for 6 months
Net Income

754,500
702,625
7,500
22,500
80,000
350,000
195,000
23,750
750
10,625
12,500
51,875

* Beginning (75,000) + Purchases (175,000) Ending (55,000) = 195,000

** (62,500 + 150,000)/10 yrs x 0.5 yr = 10,625 *** 125,000/Econ. life = 5 yrs = 25,000

Chemalite
Ending Balance Dec. 31, 2003
Liabilities & Owners Equity

Assets

Cash
Receivables
Inventory
Fixed Assets (net)
Patent

113,000
69,500
55,000
201,875 Common Stock
112,500 Retained Earnings
551,875

500,000
51,875
500,000

Note: Fixed Assets = (62,500 + 150,000) 10,625 = 201,875

Chemalite
Statement of Cash Flows 2H2003
Cash Flows from:

Indirect Method

Operations: Net Income

- Depr. & Amort
- Increase in Receivables
- Decrease in Inventory

Investing
Financing
Increase (Decrease) in Cash
Cash Begin
Cash Ending

51,875
23,125
69,500
20,000
142,500

to Retained
Earnings

0,00
117,000
230,000
113,000

Note: for Balance Sheet 31 Dec. 1991 See Chemalite(B) case Exh. 1

Chemalite (B) Statement of Cash Flow Indirect Method

Begin and End columns to calculate only for Balance sheet accounts,
not Inocme Stattements accounts (like Net Income, Depreciation)

Chemalite (B)
Gain on Sales of Fixed Assets (Machines)
Included in Cash Flow In from Investing

Cash
**
Machines (historical value)

Accum. Depreciation (jun jul)

Book value
Gain on Sale of Machines
(Incl. in Income Statement Net Income,
but it is Not a Cash Flow item, so take out)
* .............. + 1............. = .............

** = market value

Chemalite (B)
Buy PPE (land 250 and building 600) for ..............
..................% paid = .............
Plus new machine = ............
Total Investing
= .............
PPE Property Plant and Equipement) = ..........
- New machine ......
- PPE .........

Begin ............... (sold ......... with a gain of .........)

End ........... (............... + ...............)