Sukhum, Inc. Balance Sheet as of December 31, for 2001 and 2002 Assets 2001 2002 Liabilities...

	Sukhum, Inc. Balance Sheet as of December 31, for 2001 and 2002
Assets	2001	2002	Liabilities and equity	2001	2002
			Current liabilities
			Accounts payable	$210	$210
Current assets			Notes payable	110	110
Cash	$45	$45	Total	$320	$320
Accounts receivable	260	260	Long-term debt	205	205
Inventory	320	340	Stockholders’ equity
Total	$625	$645	Common stock	290	???
			Retained earnings	795	???
Fixed assets	985	1090	Total Equity	$1,085	???
Total assets	$1,610	$1,735	Total liabilities and eq	$1,610	???

9	Replace the "???" in the balance sheet for 2002 with appropriate numbers and determine what
	was the cash flow to stockholders of Sukhum Inc for 2002?
	A)	-$45
	B)	-$40
	C)	-$5
	D)	$5
	E)	$40

Sukhum, Inc., Income Statement (2002)
Net sales		710
Cost of goods sold		460
Depreciation		50
Earnings before interest
and taxes (EBIT)		$200.00
Interest		20
Taxable income		180
Taxes		60
Net income		$120.00
Dividends		40
Addition to retained earnings		$80.00

this is all the information that is given to me.

.

Expert Solution

These are the values to substitute '???':-

For Common Stock: $335 [See Note 1]
For Retained Earnings: $875 [See Note 2]
Total Equity: $1,210 [335+875]
Total liabilities and eq: $1,735 [Same as Total assets]

Cash flow to the stockholders of Sukhum Inc.:-
A) -$45 [See Note 3]

Notes:
Note 1: Common Stock-
We find this by backworking. The value of Retained Earnings is $875 [See Note 2 for reasoning]. And the total value of liabilities and equity is $1,735, and we have all other values such as Total debt at $205 and total current liabilities at $320. We know that the sum total of common stock, retained earnings, total debt and total current liablities shall be $1,735. So value of common stock = $1,735 - $875 - $205 - $320 = $335.

Note 2: Retained Earnings-
Begenning value: $795.
Addition [stated in Income statement]: $80
Therefore, closing value: $875 [being $795 + $80]

Note 3: Cash flow to stockholders-
As the beginning value of common stock was $290 and the ending value was $335 [Note 1], it means that the company has issued additional common stock to the tune of $45. This is the cash outflow to the individual (or any other for that matter) stockholders. Thus, the cash flow to stockholders is in the negative, being -$45.

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jeff jeffy answered 2 months ago

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