CHAPTER CASE Cash Flows and Financial Statements at Sunset Boards, Inc. unset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is in surfing. not business. As a result, the company's financial records are not well maintained. The initial investment in Sunset Boards was pro- vided by Tad and his friends and family. Because the ini- tial investment was relatively small, and the company has made surfboards only for its own store, the investors haven't required detailed financial statements from Tad. But thanks to word of mouth among professional surf- ers, sales have picked up recently, and Tad is consider- ing a major expansion. His plans include opening another surfboard store in Hawail, as well as supplying his "sticks" (surfer lingo for boards) to other sellers. Tad's expansion plans require a significant invest- ment, which he plans to finance with a combination of additional funds from outsiders plus some money bor rowed from banks. Naturally, the new investors and cr itors require more organized and detailed fine cial statements than Tad has previously prepared. At te urg- ing of his investors, Tad has hired financial analyt Sierra Reid to evaluate the performance of the company over the past year. After rooting through old bank statements sales receipts, tax returns, and other records, Sierras assembled the following information: Cost of goods sold Cash Depreciation Interest expense Selling and administrative expenses Accounts payable Net fixed assets Sales Accounts receivable Notes payable Long-term debt Inventory New equity 2021 2022 $323,077 $339,937 46,615 41.273 91,201 85,901 19,848 18,936 53,534 69,103 82,397 76,175 402,364 438,210 633,775 643,780 33,032 35,706 37,554 34,169 203,098 190,042 69,511 79,493 Sunset Bourds currently pays out 0 14,511 percent of het income as dividends to Tad and the other iginal investors and has a 21 percent tax rate. You Sierra's assistant, and he has asked you to prepare the following: 1. An income statement for 2021 and 2022. 2. A balance sheet for 2021 and 2022. 3. Operating cash flow for each year. 4. Cash flow from assets for 2022. 5. Cash flow to creditors for 2022. 6. Cash flow to stockholders for 2022. QUESTIONS 1. How would you describe Sunset Boards's cash flows for 2022? Write a brief discussion. 2. In light of your discussion in the previous question what do you think about Tad's expansion plan