CHAPTER CASE CASH FLOWS AND FINANCIAL STATEMENTS AT SUNSET BOARDS, INC. 5 Tunset Boards is a small company that manufac- tures 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 fi- 2013 2014 Cost of goods sold $169,969 $214,607 24,524 26,056 47,980 54,230 10,442 11,954 33,425 43,626 Depreciation Interest expense nancial records are not well maintained omSelling& administrativ The initial investment in Sunset Boards was pro- vided by Tad and his friends and family. Because the initial investment was relatively small, and the company has made surfboards only for its own store, the inves- tors haven't required detailed financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and Tad is con- expenses Accounts payable Net fixed assets Sales Accounts receivable Notes payable Long-term debt 43,344 48,090 211,680 264,021 333,426 406,427 17,378 22,542 19,757 21,571 106,848 119,976 36,570 50,185 sidering a major expansion. His plans include opening New equity his "sticks" (surfer lingo for boards) to other sellers. vestment, which he plans to finance with a combi ne another surfboard store in Hawai, as well as supplying Tad's expansion plans require a significant in- Sunset Boards currently pays out 50 percent of income as dividends to Tad and the other origi- nal investors, and has a 20 percent tax rate. You are nation of additional funds from outsiders plus some money borrowed from banks. Naturally, the new in- vestors and creditors require more organized and Paula's assistant, and she has asked you to prepare the following: detailed financial statements than Tad has previously 1. An income statement for 2013 and 2014 prepared. At the urging of his investors, Tad has hired financial analyst Paula Wolfe to evaluate the perfor- 2. A balance sheet for 2013 and 2014. 3. Operating cash flow for each year. mance of the company over the past year old bank statements, sales 4. Cash flow from assets for 2014 5. Cash flow to creditors for 2014 6. Cash flow to stockholders for 2014. receipts, tax returns, and other records, Paula has as sembled the following information