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The 2017 balance sheet of Kerberos tennis shop, inc
The 2017 balance sheet of Kerberos 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?
Expert Solution
1. Calculate the Net new equity
Net new equity = Closing equity balance - Opening equity balance
Net new equity = (2018 Common stock + 2018 Paid-in surplus account) - (2017 Common stock + 2017 Paid-in surplus account)
Net new equity = ($805,000 + $4,200,000) - ($650,000 + $3,980,000)
Net new equity = $375,000
Cash flow for shareholders = Dividend paid - Net new equity
Cashflow for shareholders = $545,000 - $375,000
Cashflow for shareholders = $170,000
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