Question

The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed $490,000 in the common stock account and $2.2 million in the additional paid-in surplus account. The 2018 balance sheet showed $530,000 and $2.4 million in the same two accounts, respectively. If the company paid out $300,000 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.) how to solve it

Answer 1

first let us know the change in common stock account

=>530,000 ending balance - 490,000 beginning balance

=>40,000

now change in capital surplus account

=>2,400,000 ending balance-2,200,000 beginning balance

=>200,000.

cash flow to stockholders = dividends- change in common stock account - change in capital surplus account

=>300,000-40,000-200,000

=>$60,000.