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 $1.$

Prepare Chemalite$$s balance sheet as of December $31,2003.$

Prepare Chemalite$$s income statement for $20031.$ In early July $2003,$ a consulting engineer delivered the prototypes of the Chemalite that he had

been developing, and he was paid a total of $$23,750.$

$2.$ During the six months from July to December $2003,$ Chemalite sold $$754,500$ of its product.

The largest single purchaser, the auto parts distributor with whom Peterson had negotiated,

still owed Chemalite, 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 for in cash.

$4.$ Chemalite, Inc., spent $$22,500$ on televiion 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

Chemalites.

$7.$ During the period, the company had borrowed $$50,000$ for a short time and repaid the loan by

year$-$end.The interest paid on the loan amounted to $$750.$

In preparing his state$-$of$-$the$-$corporation report, Alexander noted with some anxiety that the

company's bank balance had fallen a further $$117,000$ from the $$230,000$ reported in June to only

$$113,000.$ It bothered him because he believed that the company was really doing quite well, and he

failed to understand why the bank account did not appear to reflect this condition. In surveying the

cash outflows incurred by Chemalite, Inc., over the entire year, he noted the following:

$1.$ The machinery used in the production of the Chemalites was general purpose machinery, not restricted to Chemalite production, that might reasonably be expected to last for $10$ years$-$six months of which had already passed.

$2.$ There was still a stock at December $31$ of $$55,000$ worth of plastics and chemicals in the

warehouse; however, there were no finished or partially finished Chemalites at yearend.

$3.$ Although the patent that the company had acquired from Alexander had a legal life of $20$

years,he expected competitors to develop equivalent products that did not use the patented

technique in about five years.

$4.$ Alexander was quite confused by the worth of the prototypes. They had directly resulted in the development of the product the company was presently selling, so perhaps their value

had actually increased over the last six months of $2003.$

$5.$ The committee organizing The Olympic Games, Athens $2004,$ had placed a firm order with the company for $60,000$ Chemalites at a price of $$1\mathrm{.}50$ each. It was their intention to give a Chemalite to each person at the opening ceremony of the $2004$ Olympic Games and to have athletes and fans light their Chemalites, symbolic of the Olympic flame. Alexander was an inventor, not a businessperson, and he was perplexed about how to report the events of the year to the stockholders. He had a feeling that things were going well, but he did not know how to convey this message to his fellow stockholders.