Question

The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed $510,000 in the common stock account and $4.6 million in the additional paid-in surplus account. The 2018 balance sheet showed $550,000 and $4.8 million in the same two accounts, respectively. If the company paid out $310,000 in cash dividends during 2018, what was the cash flow to stockholders for the year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Answer 1

Cash flow to stockholders for the year

Cash flow to stockholders for the year = Dividend Paid – Net New Equity

= Dividend Paid – [(Common stock at the end + Additional paid-in surplus account at the end) - (Common stock at the beginning + Additional paid-in surplus account at the beginning)

= $310,000 – [($550,000 + $4,800,000) – ($510,000 + $4,600,000)]

= $310,000 – [$5,350,000 - $5,110,000]

= $310,000 - $240,000

= $70,000

The cash flow to stockholders for the year will be $70,000