On January 2, 2003, Alexander, together with a number of relatives and friends, established Chemlite, Inc. 500,000 shares were issued, of which Alexander received 125,000 in exchange for his patent, and the remainder were sold to the other investors at $1 per share. During the period January 2, 2003 through June 30,2003 Chemlite Inc. made the following expenditures:
-January 15- Paid $7,500 in legal fees, charter costs, and printing expenses associated with incorporation of the company
-June 15-Spent $62,500 building the machinery that would be used to produce the first commercial models of the Chemlite
-June 24-Purchased $75,000 worth of plastics and chemicals for use in the production of commercial Chemlites
During the last half of 2003, Chemlite, Inc. did indeed go into full operation. To prepare for the shareholders' meeting in early January 2004, Bill Murray, the firms recently hired bookkepper produced the following data:
1) In early July 2003, a consulting engineer delivered the prototypes of the Chemlites that he had been developing, and he was paid a total of $23,750.
2) During the six months from July to December 2003, Chemlite sold $754,500 of its product. The largest single purchaser, the auto parts distributor with whom Peterson had negotiated, still owed Chemlite, Inc., $69,500. All other customers accounts were paid in full by year end.
3) Additional chemicals and plastics were purchased for a total of $175,000. All of these purchases were paid in cash.
4) Chemlite Inc., spent $22,500 on television and trade journal advertising to introduce the product.
5) During the six months ended December 31, 2003, the company expended $350,000 on direct manufacturing labor and on manufacturing-related overhead(rent, utilities, supervisory labor) An additional $80,000 was spent on corporate salaries and other corporate expenses
6) In early July, a further $150,000 was spent on machinery to be used in the production of Chemlites
7) During the period, the company had borrowed $50,000 for a short time and repaid loan by year-end. The interest paid on the loan amounted to $750.00
Chemalite - Record transactions and prepare two sets of financial statements (income statement and balance sheet) - one as of 30 June and one for the full year ending 31 December. Record transactions using journal entries, general ledger, and t-accounts,