Caso chemalite

KODAK - ASSIGNMENT
EARNINGS PER SHARE (EPS) CALCULATIONS (p.36) 1998 EARNINGS $1,390mm 1998 NUMBER OF SHARES 323.3mm $1,390 EARNINGS DIVIDED BY 323.3mm SHARES =$4.30 EPS 2000 EARNINGS $1,407 2000 NUMBER OF SHARES 304.9mm $1,407 EARNINGS DIVIDED BY 304.9mm SHARES =$4.62 EPS 2000 EARNINGS $1,407mm 1998 NUMBER OF SHARES 323.3mm $1,407mm EARNINGS DIVIDED BY 323.3mm SHARES =$4.35 EPS

FinancialAccounting
! Eat your vegetables! ! Not accountants ! Fly at 30,000 feet ! Stop me because if you’re, lost everyone else is too

Chemalite
What period are we evaluating? I. Pre-operating period: Jan. 2 - June 30
Setting-up the corporation
- issuance of corporate stock

II. First year of operations: Jan. 2 - December 31
Balance Sheet
- who owns the assets at a given point in time? Snapshot.Income Statement
- what revenues/expenses were recognized during the period?

Statement of Cash Flow
- where’s the money?

Chemalite - EQUITY
375,000 shares for $375,000

Pre-Operating Period

125,000 shares for patent (25% of corporate ownership)

What is the patent worth?/How to account for it? FMV (Kelly Blue Book) Expectation of value (based on the subjective evaluation ofChemalite’s exclusive right to manufacture the light, and the future profitability of activities involving manufacture, distribution and sales of the light)

Cost basis, an arms-length transaction between disinterested parties

Chemalite - EQUITY
375,000 shares for $375,000

Pre-Operating Period

125,000 shares for patent (25% of corporate ownership)

Balance Sheet - Statement offinancial condition, June 30

Assets Cash 375,000 Patent 125,000 Total assets 500,000

Liabilities and Owners' Equity Common stock 500,000

Total equity 500,000

What if the patent later turns out to be worthless?

BALANCE SHEET
Assets Cash Cash - new Patent Total assets 375,000 100,000 125,000 600,000
Liabilities and Owners' Equity Common stock

500,000 100,000 600,000

Bank Debt Totalliabilities/equity

BALANCE SHEET
Assets Cash Patent Material Machinery Total assets 25,000 125,000 200,000 250,000 600,000
Liabilities and Owners' Equity Common stock Bank Debt

500,000 100,000

Total liabilities/equity

600,000

Chemalite - Legal Fees
$7,500 Legal Fees

Pre-Operating Period

Investment to capitalize? - the right to operate in perpetuity as a legal entity Expenseto write-off? - cash is gone - no revenue to match expense

Chemalite - Legal Fees
$7,500 Legal Fees

Pre-Operating Period

Investment to capitalize? - the right to operate in perpetuity as a legal entity Expense to write-off? - cash is gone - no revenue to match expense

Balance Sheet - Statement of financial condition, June 30

Assets Cash 367,500 Patent 125,000 Legal fees 7,500Material Machinery Total assets 500,000

Liabilities and Owners' Equity Common stock 500,000

Total equity 500,000

Chemalite

Pre-Operating Period

Larson at shareholder’s meeting:
“all I can see is that six months ago we had $375,000 and now we have $230,000 . . . we’ve managed to lose $145,000 in six months . . .”

Chemalite

Pre-Operating Period

$62,500 equipment $75,000plastics and chemicals
Balance Sheet - Statement of financial condition, June 30

Assets Cash Patent Legal fees Material Machinery Total assets

230,000 125,000 7,500 75,000 62,500 500,000

Liabilities and Owners' Equity Common stock 500,000

Total equity 500,000

Larson at shareholder’s meeting:
“all I can see is that six months ago we had $375,000 and now we have $230,000 . . . we’vemanaged to lose $145,000 in six months . . .”

Chemalite Balance Sheet
- who owns what assets at a given point in time?

Income Statement
- what revenues/expenses were recognized during the period?

Statement of Cash Flow
- where’s the money?

Chemalite

First Year of Operations

Income Statement Where to begin: (1) what was sold? (2) what did it cost to
make? (3) what was the gross...