Question

The 2014 statement of financial position of Roger’s Tennis Shop Inc. showed $630,000 in the common stock account and $4.9 million in the additional retained earnings account. The 2015 statement of financial position showed $670,000 and $5.4 million in the same two accounts, respectively.

  

If the company paid out $620,000 in cash dividends during 2015, what was the cash flow to shareholders for the year?

Answer 1

Cash flow to stockholders =

Dividends paid - [(common stock-end + Additional retained earnings-end) - (common stock-end + Additional retained earnings-end)]

Cash flow to stockholders = $620,000 - [($670,000 + $5,400,000) - ($630,000 + $4,900,000)]

Cash flow to stockholders = $620,000 - [($6,070,000) - ($5,530,000)]

Cash flow to stockholders = $80,000