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# Cash flows and net income

The following account balances relate to the stockholders' equity accounts of Gore Corp. at year-end.

2008 2007
Common stock, 10,500 and 10,000 shares,
respectively, for 2008 and 2007 \$160,000 \$140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 260,000

A small stock dividend was declared and issued in 2008. The market value of the shares was \$10,500. Cash dividends were \$15,000 in both 2008 and 2007. The common stock has no par or stated value.

What was the amount of net income reported by Gore Corp. in 2008?
\$

Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2008.
Cash inflow or Cash outflow from the issue of stock was \$.

Cash inflow or Cash outflow for dividends was \$.

Indicate where each of the cash inflows or outflows identified in the previous question would be classified on the statement of cash flows.
The issue of common stock would be classified as financing activities, investing activities, or operating activities.

The payment of dividends would be classified as financing activities, operating activities, or investing activities.

#### Solution Preview

What was the amount of net income reported by Gore Corp. in 2008?

The change in retained earnings = 300,000-260,000=40,000
Total dividends declared in 2008 = 10,500 (stock) + 15,000 (cash) = 25,500
Net Income = Change in retained earnings + Dividends
Net Income = 40,000 + 25,500 = \$65,500

Determine the ...

#### Solution Summary

The solution explains some calculations relating to net income and cash flows

\$2.19