Last year\'s balance sheet of Sugarpova’s Tennis Shop, Inc., shows $570,000 in t
ID: 1170668 • Letter: L
Question
Last year's balance sheet of Sugarpova’s Tennis Shop, Inc., shows $570,000 in the common stock account and $2.4 million in the additional paid-in surplus account. The current balance sheet shows $610,000 and $2.8 million in the same two accounts, respectively. If the company paid out $515,000 in cash dividends during the year, and $50,000 in interest, what was the cash flow to stockholders for the year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Cash flow to stockholders (CFTS) $ Does this represent a cash inflow or outflow to the firm?
Explanation / Answer
Cash Flow to stockholders (CFTS) = $75,000
Cash Flow to stockholders (CFTS) = Dividends – Net new equity raised
= Dividends Paid – [ ( Common stock (CY) + Paid in surplus (CY) – [ ( Common stock (LY) + Paid in surplus (LY) ]
= $515,000 – [ ($610,000 + 28,00,000) – ( $570,000 + 24,00,000 ) ]
= $515,000 – [ $34,10,000 – 29,70,000 ]
= $515,000 - $440,000
= $75,000
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