Assn02 - Solutions.pdf - MGMT 403 \u2013 Assignment 2 Exercise 1 MGMT 403 \u2013 Assignment 2 Exercise 1 Complete the following items related to the

Assn02 - Solutions.pdf - MGMT 403 u2013 Assignment 2...

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MGMT 403 – Assignment 2 Exercise 1 Winter 2018 1 MGMT 403 – Assignment 2 Exercise 1 Complete the following items related to the “Chemalite, Inc.” case that you can find on the course website. 1)Using the financial statement template, below, record the effect of each of Chemalite’s transactions for 2003. Please make the simplifying assumption that Chemalite’s machinery is used solely for non-manufacturing purposes. Please also assume that the depreciation on the machinery starts on July 1. 2)Prepare Chemalite’s balance sheet as of December 31, 2003. 3)Prepare Chemalite’s income statement for 2003.
2 MGMT 403 – Assignment 2 Exercise 1 (continued) Winter, 2018 Exercise 1 (continued) Part 1: Financial statement template (See comments at the end of this solutions file) Transaction Assets Liabilities and equity Cash A/R Inventory PP&E Intangibles Loan Common stock Retained earnings 1/2/2003 Issue 500K shares +375 +125 +500 1/15/2003 Pay $7.5K for legal fees -7.5 -7.5 6/15/2003 Pay $62.5K for machinery -62.5 +62.5 6/24/2003 Purchase $75K in materials -75 +75 Bill Murray transactions: 1) Pay $23.75 for prototypes -23.75 -23.75 2) Sell $754.5K of product; $69.5K not yet received (revenue only) +685 +69.5 +754.5 3) Purchase $175K in materials -175 +175 4) Spend $22.5K in ads -22.5 -22.5 5) Incur $350K in manufacturing costs; Pay $80K for corporate expenses -430 +350 -80
3 MGMT 403 – Assignment 2 Exercise 1 (continued) Winter, 2018 Transaction Assets Liabilities and equity Cash A/R Inventory PP&E Intangibles Loan Common stock Retained earnings 6) Pay $150K for machinery -150 +150 7a) Borrow $50K +50 +50 7b) Repay $50K loan + $750 interest -50.75 -50 -0.75 Alexander transactions: 1) Depreciation -10.625 -10.625 2) Cost of goods sold -545 -545 3) Patent amortization -20.83 -20.83 4) Expensing of prototypes 5) Order received for Olympic Games Ending balance 12/31/03 113 69.5 55 201.875 104.17 0 500 43.545
MGMT 403 – Assignment 2 Exercise 1 (continued) 4 Exercise 1 (continued) Part 2: Prepare Chemalite’s balance sheet at December 31, 2003. $ 0 500 Part 3: Prepare Chemalite’s income statement for 2003.
MGMT 403 – Assignment 2 Exercise 2 5 Exercise 2 Answer the following questions using the attached excerpts from the 2016 10-K of Scholastic Corporation (modified from the original). 1)Why does the Non-cash write-off related to asset impairments appear as a positive adjustment in cash flow from operating activities in 2016?

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