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    Cash flow effects of changes in equity accounts

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    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.
    Determine cash flow effects of changes in equity accounts.

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

    (b) Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2008.
    (c) Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.

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    Solution Summary

    The solution explains how to calculate the cash flow effects of changes in equity accounts