The 2017 balance sheet of kerber's tennis shop, inc., showed $650,000 in the common stock account and $3.98 million in the additional paid-in surplus account. The 2018 balance sheet showed $805,000 and $4.2 million in the same two accounts, respectively. If the company paid out $545,000 in cash dividends during 2018, what was the cash flow to stockholders for the year?

[tex]Cash Flow to shareholders = Dividends - net change to common stock - net change to capital surplus + net change in treasury stock[/tex] --- (1)

We have:

[tex]Net change to common stock = Ending common stock - Beginning common stock[/tex]

[tex]Net change to common stock = 805000 - 650000[/tex]

[tex]Net change to common stock = 155000[/tex]

Next we find the net change to capital surplus.

[tex]Net change to capital surplus = Ending capital surplus - Beginning capital surplus[/tex]

[tex]Net change to capital surplus = 4,200,000 - 3,980,000[/tex]

[tex]Net change to capital surplus = 220000[/tex]

Pluggin the calculated values in equation (1) we get,

[tex]Cash Flow to shareholders = 545000- 155000 - 220000[/tex]

[tex]Cash Flow to shareholders = $170,000[/tex]

abiolataiwo2015 abiolataiwo2015 · Answer 2 · 2021-11-29T13:02:08+01:00

Based on the information given the cash flow to stockholders for the year is $170,000.

Cash flow to stockholders

Cash flow to stockholders = $545,000 - [($805,000 + $4,200,000) - ($650,000 + $3,980,000)]

Cash flow to stockholders = $545,000 - ($5,005,000-$4,630,000)

Cash flow to stockholders = $545,000 - $375,000

Cash flow to stockholders = $170,000

Inconclusion the cash flow to stockholders for the year is $170,000.

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