Question

The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $790,000 in the common stock account and $6.75 million in the additional paid-in surplus account. The 2009 balance sheet showed $875,000 and $7.9 million in the same two accounts, respectively. If the company paid out $600,000 in cash dividends during 2009, What was the cash flow to stockholders for the year?

Multiple Choice $635,000 $190,000 $8,175,000 $275,000 $-635,000

Answer 1

Cash Flow to stockholders = Dividends paid - Net new equity

Cash Flow to stockholders = Dividends paid – [(Common equity at the end+ additional paid-in surplus account ending) – (Common equity at the beginning+ additional paid-in surplus account beginning)

Cash Flow to stockholders =600000-((875000+7900000)-(790000+6750000))

Cash Flow to stockholders = $-635,000

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