Case Study Chemalite Inc

Question #1

Record each transaction in general journal format for the six month period ended June 30, 2003. Make sure that you document any assumptions made.

Entry No. Accounts Title Amount Debited Amount Credited

1 Cash

Patent

Shareholder’s Equity $375,000

$125,000

$500,000

2 Incorporation Expenses

Cash $7,500

$7,500

3 Property, Plant and Equipment

Cash $62,500

$62,500

4 Inventory

Cash $75,000

$75,000

*Incorporations Expenses are legal fees, charters cost and printing expenses.

Question #2

Prepare a general ledger using the T accounts format discussed in class based on the journal entries for the six month period ended June 30, 2003.

Cash (A)

1 $375,000

2 $7,500

3 $62,500

4 $75,000

$230,000

Patent (A)

1 $125,000

$125,000

Incorporation Expense

2 $7,500

$7,500

PP & E (A)

3 $62,500

$62,500

Inventory (A)

4 $75,000

$75,000

Shareholder’s Equity (SE)

1 $500,000

$500,000

Question #3

Prepare a Balance Sheet, Income Statement and Statement of Cash Flows for the six month

period ended June 30, 2003.

Chemalite, Inc.

Balance Sheet from January 1, 2003 to June 30, 2003

Assets

Current Assets

Cash $230,000

Inventory $75,000

Total current assets $305,000

Fixed Assets

Equipment $62,500

Patent $125,000

Total fixed assets $187,500

Total assets $492,500

Liabilities and Shareholders Equity

Liabilities

Current Liabilities

Total Current Liabilities $0

Long-term liabilities

Total liabilities $0

Shareholders' Equity

Common Stock $500,000

Retained Earnings ($7,500)

Total shareholders'

...