Question

The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed $450,000 in the common stock account and $2.1 million in the additional paid-in surplus account. The 2015 balance sheet showed $490,000 and $2.4 million in the same two accounts, respectively. If the company paid out $400,000 in cash dividends during 2015, 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 = Dividend paid - Net New equity

= Dividends paid - [(common stock _end + Additional Paid up cap _end) - (common stock _beg + Additional Paid up cap _beg)]

= $400,000 - [($490,000 + $2,400,000) + ($450,000 + $2,100,000)

= $400,000 - $340,000

=$60,000

Cash flow to stockholders = $60,000