ACC 501 FINANCIAL ACCOUNTING & REPORTING Group Study 1 Group No.

1 Member Billur Kayador Mert Sevin alar Dnmezler Akn Albayrak I! tru"tor Prof.Dr. e!e" Pekdemir #ovember $% &'(' #010$#011 F%&& ' S%b%!"( U!()er (ty

E*ECUTI+E SUMMAR,
)n t*e !a+e of ,*emalite% )n!. -e analyzed t*e finan!ial data "rovided by one of t*e lar.e+t +to!k*older+ of t*e !om"any% Bennett Ale/ander% and t*e !om"any0+ bookkee"er. A!!ordin. to .iven e/"enditure+% tran+a!tion+% !a+* outflo-+ and ot*er related finan!ial information1 -e "re"ared tran+a!tion 2ournal+% 34a!!ount+% in!ome +tatement+% +tatement+ of finan!ial "o+ition and +tatement+ of !a+* flo-+ for t*e +i/ mont*+ ended 5une 6'% &''6 and for t*e year ended De!ember 6(% &''6. 7e t*en !on!luded our re"ort -it* an analy+i+ about t*e finan!ial "erforman!e of ,*emalite% )n!. for it+ fir+t year.

T-E .ATA
3*e !a+e of ,*emalite% )n!. .ive+ detailed information about *o- t*e !om"any -a+ formed and t*e finan!ial data of t*e year &''6. 3*e e/"enditure+% tran+a!tion+ and !a+* outflo-+ are .iven in t-o *alf+ of t*e year &''6.

SOFT/ARE
8ur analy+i+ -a+ "erformed entirely in 9/!el &'':.

ANAL,SIS
3*e fir+t ;ue+tion a+k+ to "re"are a +ummary of t*e !a+* tran+a!tion+ for t*e +i/ mont*+ ended 5une 6'% &''6. 3*e +ummary and t*e 34a!!ount+ are +*o-n in 3able ( and 3able &.

T%b&e 1. ,a+* tran+a!tion+ for t*e +i/ mont*+ ended 5une 6'% &''6 Accounts and Date Entry No. Debit Explanation

Credit

1/2/2003

1/1"/2003

)/1"/2003

)/2,/2003

Intengible Assets (patent Cas$ &$are$older's E(uity Establishmne t of Chemalite, Inc. Incorporation Expenses Cas$ Expenses like legal fees, charter costs...etc **+E Cas$ Building the machinery In-entory Cas$ Purchasing Inventory

! 12"#000 ! 3%"#000 ! "00#000

%#"00 ! %#"00

)2#"00 ! )2#"00

%"#000 ! %"#000

T%b&e #. 34a!!ount+ for t*e +i/ mont*+ ended 5une 6'% &''6 .iabili ties and Asset &$are s $olde rs' E(uit y &$are $olde Cas$ r's E(uit y ! ! 1 3%"#0 2 %#"00 00 ! )2#"0 3 0 ! , %"#00

! "00#0 00 ! "00#0 00

0 ! 230#0 00 Expe nse and /e-e nue Acco unts Incor porati on Expe nses 2 ! %#"00 ! %#"00 **+E ! 3 )2#"0 0 ! )2#"0 0 In-en tory ! , %"#00 0 ! %"#00 0 3*e +e!ond ;ue+tion a+k+ to "re"are an in!ome +tatement for t*e +i/ mont*+ ended 5une 6'% &''6. 3*e in!ome +tatement i+ +*o-n in 3able 6. T%b&e 0. 3*e in!ome +tatement for t*e +i/ mont*+ ended 5une 6'% &''6 Net Sales ! Cost o1 &ales ! Gross Profit 2perating Expenses ! ! 0 0

Inten gible Asset s

! 1 12"#0 00 ! 12"#0 00

0 0%#"00

Operating Profit Profit before Tax 3ax Net Income (Loss)

! ! ! !

0%#"00 0%#"00 0 0%#"00

Mr. <ar+on% one of t*e +to!k*older+ of ,*emalite% )n!. believe+ t*at t*e !om"any lo+t =(>?%''' in +i/ mont*+. @o-ever% it i+ !lear from t*e in!ome +tatement -*i!* i+ "re+ented above t*at t*e !om"any only lo+t =:%?'' durin. t*e+e +i/ mont*+. 3*e t*ird ;ue+tion a+k+ to "re"are a +tatement of finan!ial "o+ition at 5une 6'% &''6 and a +tatement of !a+* flo-+ for t*e +i/4mont* "eriod. 3*e+e +tatement+ are +*o-n in 3able > and 3able ?.

T%b&e 1. Statement of finan!ial "o+ition at 5une 6'% &''6 ASSETS Current Assets Cas$ ! 230#000 In-entory ! %"#000 3otal Current ! 30"#000 Assets **+E ! )2#"00 Intangible Assets ! 12"#000 TOTAL ASSETS SHAREHOL ER S! E"#IT$ AN LIA%ILITIES Current .iabilities Accounts *ayable 3otal Current .iabilities &$are$olders' E(uity Capital /etained Earnings 3otal &$are$olders' E(uity TOTAL SHAREHOL ER

,42#"00

! !

0 0

! ! ! !

"00#000 0%#"00 ,42#"00 ,42#"00

S! E"#IT$ AN LIA%ILITIES T%b&e 5. Statement of !a+* flo-+ for t*e +i/4mont* "eriod OPERATING A&TI'ITIES Net Inco5e ! 0%#"00 Depreciation and ! 0 A5orti6ation C$ange in Account ! 0 /ecei-able C$ange in ! 0%"#000 In-entory C$ange in ! 0 Current .iabilities Net Cas$ pro-ided by ! 072#"00 2perating Acti-ities IN'ESTING A&TI'ITIES *urc$ase o1 e(uip5ent Net Cas$ used by In-esting Acti-ities (INAN&ING A&TI'ITIES Net Cas$ pro-ided by 8inancing Acti-ities &ASH an) &ASH E"#I'ALENTS Cas$ balance on 9an 1# 2003 End o1 *eriod

! !

0)2#"00 0)2#"00

! !

3%"#000 230#000

3*e fort* ;ue+tion a+k+ to "re"are a +tatement of finan!ial "o+ition at De!ember 6(% &''6% an in!ome +tatement and a +tatement of !a+* flo-+ for t*e year ended De!ember 6(% &''6. 3*e+e +tatement+ and al+o t*e tran+a!tion 2ournal and 34a!!ount+ for t*e year ended De!ember 6(% &''6 are +*o-n in 3able A% 3able :% 3able $% 3able B and 3able ('. T%b&e 2. 3ran+a!tion 2ournal for t*e year ended De!ember 6(% &''6

Date 1/2/2003

Entry No. 1

1/1"/2003

)/1"/2003

)/2,/2003

%/1/2003

"

%012/1/2003

%012/1/2003

%012/1/2003

Accounts and Explanation Intengible Assets (patent Cas$ &$are$older's E(uity Establishmen t of Chemalite, Inc. Incorporation Expenses Cas$ Expenses like legal fees, charter costs...etc **+E Cas$ Building the machinery In-entory Cas$ Purchasing Inventory *rototype Cas$ Purchase of protoype Cas$ Account /ecei-able &ales Sales to auto parts distributor In-entory Cas$ Purchasing additional inventory Ad-ertising and *ro5otion (A+* Expense

Debit ! 12"#000 ! 3%"#000

Credit

! "00#000

%#"00 ! %#"00

)2#"00 ! )2#"00

%"#000 ! %"#000

23#%"0 ! 23#%"0

! )7"#000 ! )4#"00 ! %",#"00

! 1%"#000 ! 1%"#000

22#"00

%012/1/2003

%012/1/2003

10

%012/1/2003

11

%012/1/2003

12

%012/1/2003

13

%012/1/2003

1,

Cas$ elevision and trade !ournal advertising C2:& &alaries# :eneral and Ad5inistratio n (&:A Cas$ "irect manufacturin g labor and overhead **+E Cas$ Purchase of machinery Interest Expense Cas$ Interest expense of loan C2:& In-entory (2"00000 ""000 #emaining Inventory Depreciation Expense (12"000/" Intengible Assets (patent "epreciation expense of patent Depreciation Expense (1"0000/20 **+E $ month dep. of ne%ly bought machine

22#"00

! 3"0#000 ! 70#000 ! ,30#000

! 1"0#000 ! 1"0#000

%"0 ! %"0

! 14"#000 ! 14"#000

2"#000 ! 2"#000

%#"00 ! %#"00

T%b&e 3. 34a!!ount+ for t*e year ended De!ember 6(% &''6 .iabili ties and Asset &$are s $olde rs' E(uit y &$are $olde Cas$ r's E(uit y ! ! 1 3%"#0 2 %#"00 00 ! ! ) )7"#0 )2#"0 3 00 0 ! %"#00 , 0 ! 23#%" " 0 ! 1%"#0 % 00 Expe nse ! and 22#"0 7 /e-e 0 nue Acco unts ! 4 ,30#0 00

! "00#0 00 ! "00#0 00

Incor porati on

Expe nses ! 1"0#0 00 ! %"0 ! 113#0 00 &ales Inten gible Asset s ! 1 12"#0 00 ! 100#0 00 ! %",#" 00 ! 2"#00 0 13 ) ! %",#" 00 10 11 2 ! %#"00 ! %#"00

A+* Expe nse **+E ! 3 )2#"0 0 ! 10 1"0#0 00 ! 20"#0 00 ! %#"00 1, ! 7 22#"0 0 ! 22#"0 0

&:A ! 4 70#00 0

In-en tory ! , %"#00 0 ! % 1%"#0 00 ! ! 14"#0 00 12

! 70#00 0

C2: & 4 !

""#00 0

3"0#0 00 ! 12 14"#0 00 ! ","#0 00

*roto ype ! " 23#%" 0 ! 23#%" 0

Intere st Expe nse ! 11 %"0 ! %"0

Acco unts /ecei -able ! ) )4#"0 0 ! )4#"0 0

Depr eciati on Expe nse ! 13 2"#00 0 ! 1, %#"00 ! 32#"0 0

T%b&e 4. )n!ome +tatement for t*e year ended De!ember 6(% &''6 Net Sales ! %",#"00 Cost o1 &ales ! 0","#000 Gross Profit &:A Incorporation Expenses A+* Depreciation Expenses ! ! ! ! 0%#"00 ! 032#"00 022#"00 204#"00 070#000

Operating Profit Interest Expense Profit before Tax 3ax Net Income (Profit)

! ! ! ! !

)%#000 0%"0 ))#2"0 0 ))#2"0

T%b&e 5. Statement of finan!ial "o+ition at De!ember 6(% &''6 ASSETS Current Assets Cas$ ! 113#000 Accounts ! )4#"00 /ecei-able In-entory ! ""#000 3otal Current ! 23%#"00 Assets **+E ! 20"#000 *rototype ! 23#%"0 Intangible Assets ! 100#000 TOTAL ASSETS

"))#2"0

SHAREHOL ER S! E"#IT$ AN LIA%ILITIES Current .iabilities Accounts *ayable ! 0 3otal Current ! 0 .iabilities &$are$olders' E(uity Capital ! "00#000 /etained ! ))#2"0 Earnings 3otal &$are$olders' ! "))#2"0 E(uity TOTAL SHAREHOL ER ! "))#2"0 S! E"#IT$ AN LIA%ILITIES T%b&e 10. Statement of !a+* flo-+ for t*e year ended De!ember 6(% &''6 OPERATING A&TI'ITIES Net Inco5e ! ))#2"0 Depreciation and ! 32#"00 A5orti6ation

C$ange in Account /ecei-able C$ange in In-entory C$ange in Current .iabilities Net Cas$ pro-ided by 2perating Acti-ities IN'ESTING A&TI'ITIES *urc$ase o1 e(uip5ent *rototype *urc$ase Net Cas$ used by In-esting Acti-ities (INAN&ING A&TI'ITIES Net Cas$ pro-ided by 8inancing Acti-ities &ASH an) &ASH E"#I'ALENTS Cas$ balance on 9an 1# 2003 End o1 *eriod

! ! ! !

0)4#"00 0""#000 0 02"#%"0

! ! !

0212#"00 023#%"0 023)#2"0

3%"#000 ! 113#000

3*e la+t ;ue+tion a+k+ to "re"are a re"ort to +to!k*older+ on t*e finan!ial "o+ition of ,*emalite% )n!. for it+ fir+t year% 5anuary (% &''6 to De!ember 6(% &''6. 3*e re"ort i+ "re+ented belo-. Dear Sto!k*older1 Cor t*e "a+t year D5an ( &''6 E De!. ( &''6F -e *ave been .ro-in. +u!!e++fully alt*ou.* -e are in a ne-ly develo"in. market and *ave 2u+t been o"eratin. in t*e indu+try for one year. Startin. from 5uly &''6% o"eration+ *ave been .oin. +-iftly and -e *ave +tarted to +ee our bu+ine++ .ro- firmly. 7e are "roud to announ!e t*at our .ro++ mar.in i+ !urrently &$G -*i!* indi!ate+ t*at -e *ave been .eneratin. a +i.nifi!ant amount of +ale+ revenue in e/!e++ over t*e !o+t of t*e inventory +old. 7*en -e look at our in!ome +tatement -e +ee t*at t*e !om"any .enerated =AA%&?' in "rofit+% t*erefore o-ner0+ e;uity *a+ in!rea+ed by t*e +ame amount a+ a re+ult of our o"eration+. )nventory turnover i+ &' -*i!* +*o-+ t*at ,*emalite

)n!. *a+ !o+t of .ood+ +old t*at i+ &' time+ it+ avera.e inventory level. 3*i+ mean+ t*at t*e !om"any *old+ it+ inventory at an avera.e of ($ day+ D6A?H&'F. <ookin. at t*e return on !ommon +to!k*older0+ e;uity% t*e !om"any realized a &6G ratio% meanin. for ea!* (= inve+ted or reinve+ted by !ommon +to!k*older+% ,*emalite )n!. .enerate+ ='.&6 of net earnin.+. #on4!urrent a++et+ *ave in!rea+ed by B6G !om"ared to t*e fir+t *alf of t*e year% due to inve+tment+ on PPI9% t*e "rototy"e and a!;uirin. t*e "atent. After !areful !on+ideration of t*e !a+* flo- a!tivitie+% -e +ee t*at t*e !om"any *a+ ne.ative fi.ure+ of net !a+* flo- from o"eratin. a!tivitie+% due to va+t inve+tment+ -*i!* -ill in return .enerate !a+* and rai+e more !a"ital. 3*e "re4o"erational e/"en+e+ +*ould be realized a+ inve+tment+ to t*e bu+ine++. 3*erefore t*e (>?%''' de!rea+e on !a+* balan!e i+ a mi+leadin. fi.ure for t*e +to!k*older+. 3*e order+ from t*e 8lym"i! Jame+ amountin. for =B'%''' -ill boo+t our !a+* inflo- from o"eratin. a!tivitie+ and definitely *el" "romote our "rodu!t in t*e international market. 3*e amount +"ent for t*e televi+ion and trade 2ournal adverti+in. to introdu!e our "rodu!t *a+ "aid off it+ dividend+ in term+ of order+ re!eived from t*e !u+tomer+. A+ a re+ult% t*e !om"any i+ lookin. bri.*ter into t*e future -it* no liabilitie+. ,*emalite+ )n!. *a+ .enerated "romi+in. level+ of net in!ome and mo+t of !a+* e/"en+e+ -ere +"ent on t*e im"rovement of t*e bu+ine++. )n addition to t*e +u!!e++ful .ro-t* of t*e !om"any% ,*emalite+ )n!. -ill o"erate in t*e u"!omin. year -it* a .uaranteed =B'%''' in +ale+ revenue.