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Sagot :
Solution:
The formula for calculating the Cash Flow to Stockholders for the year is
= Dividend Payment during the year – Change in value of Common stock during the year – Change in value of Additional paid in surplus account during the year
Where,
Change in value of Common stock during the year = Value of Common stock of the Current Year – Value of Common stock of the Previous Year
Change in value of Additional paid in surplus account during the year = Value of Additional paid in surplus account of the Current Year – Value of Additional paid in surplus account of the Previous Year
As per the Information given in the question we have
Dividend Payment during the year 2020 = $ 600,000
Value of Common stock of the Current Year i.e., 2020 = $ 630,000
Value of Common stock of the Previous Year i.e., 2019 = $ 590,000
Thus Change in Common stock during the Year = $ 630,000 - $ 590,000 = $ 40,000
Value of Additional paid in surplus account of the Current Year = $ 5,300,000
Value of Additional paid in surplus account of the Previous Year = $ 4,800,000
Thus Change in Additional paid in surplus account = $ 5,300,000 - $ 4,800,000 = $ 500,000
Thus applying the above information in the formula for calculating the Cash Flow to Stockholders is
= $ 600,000 - $ 40,000 - $ 500,000
= $ 60,000
Thus the Cash flow to stockholders for the year 2020 = $ 60,000
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