115. Given the financial information for the A.E. Neuman Corporation, a) Prepare a Statement of Cash Flows for the year ended December 31, 2002. b) What is the dividend payout ratio for 2003? c) If we increased the dividend payout ratio to 100%, what would happen to retained earnings? A.E. Neuman Corporation -- Balance Sheets ASSETS 2002 2003 Cash Marketable Securities Accounts Receivable Inventories Investments $ 45,000 175,000 240,000 230,000 70,000 $ 50,000 160,000 220,000 275,000 55,000 I 1,550,000 -600,000 950,000 $1,710,000 Plant and Equipment 1,300,000 Less Accumulated Depreciation -450,000 Net Plant and Equipment 850,000 Total Assets $1,610,000 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable $ 110,000 Notes Payable 65,000 Accrued Expenses 30,000 Income Taxes Payable 5,000 Bonds Payable (1999) 800,000 Common Stock (100,000 shares, Sl par) 100,000 Capital Paid in Excess of Par 100,000 Retained Earnings 400.000 Total Liabilities and Stockholders' Equity $1,610,000 A.E. Neuman Corporation Income Statement For Year Ended December 31, 2003 Sales $5,500,000 Less: Cost of Goods Sold 4,200,000 Gross Profit 1,300,000 Less: Selling and Administrative Expense 260,000 Operating Profit 1,040,000 Less: Depreciation Expense 150,000 Earnings Before Interest and Taxes 890,000 Less: Interest Expense 90.000 Earnings Before Taxes 800,000 Less: Taxes (50%) 400,000 Net Income S 400,000 Dividends Paid S 300,000 $ 85,000 10,000 5,000 10,000 900,000 100,000 100,000 500.000 $1,710,000 Answer: $400,000 a) Cash Flows from Operating Activities: Net Income (earnings after taxes) Adjustments: Add back depreciation Decrease in marketable securities Decrease in accounts receivable Increase in inventories Decrease in accounts payable Decrease in notes payable Decrease in accrued expenses Increase in incomes taxes payable Total Adjustments Net Cash Flows from Operating Activities Cash Flows from Investing Activities Decrease in Investments Increase in Plant & Equipment Net Cash Flows from Investing Activities Cash Flows from Financing Activities Increase in Bonds Payable Dividends Paid Net Cash Flows from Financing Activities Net Increase (Decrease) in Cash Flows b) Dividend payout ratio Dividends paid, 2003 Net Income, 2003 c)