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 outflowCash inflow from the issue of stock was $.
Cash outflowCash inflow 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 investing activitiesfinancing activitiesoperating activities.
The payment of dividends would be classified as operating activitiesfinancing activitiesinvesting activities.
To determine the amount of net income reported by Gore Corp. in 2008, you would need more information such as revenue and expenses. Net income is calculated by subtracting the total expenses from the total revenue. However, this information is not provided in the given account balances.
To determine the amounts of cash inflows or outflows related to the common stock and dividend accounts in 2008, you can look at the changes in the common stock and retained earnings accounts.
For the issue of common stock, there is no specific information provided about any new issuances in 2008. However, it mentions a small stock dividend being declared and issued. A stock dividend is a distribution of additional shares to existing shareholders, usually as a percentage of their current share ownership. In this case, the market value of the shares was $10,500. Since it is a dividend, it means existing shareholders received additional shares instead of cash. Therefore, there would not be a cash inflow or outflow from the issue of stock in 2008.
For the payment of dividends, it is mentioned that cash dividends were $15,000 in both 2008 and 2007. This means that $15,000 cash was paid out to the shareholders as dividends in 2008. Therefore, the cash outflow for dividends in 2008 would be $15,000.
As for the classification of the cash inflows or outflows on the statement of cash flows, it depends on the nature of the activity.
The issue of common stock, if it were cash received from issuing additional shares, would be classified as a financing activity. However, since it is a stock dividend and no cash is involved, it would not be classified as any cash inflow activity.
The payment of dividends is considered as a cash outflow from the company to the shareholders. It represents a return of profits to the owners. Therefore, the payment of dividends would be classified as a financing activity on the statement of cash flows.
Please note that without further information, it is not possible to calculate the net income reported by Gore Corp. or determine any additional cash inflows or outflows related to the common stock and dividend accounts in 2008.