CHAPTER CASE Cash Flows and Financial Statements at Sunset Boards, nc unset Boards is a small company that manufactures 2015 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 re- cords are not well maintained $203,963 $257,528 Cost of goods sold Cash Depreciation Interest expense Selling and administrative 29,429 31,267 57,576 12,530 14,345 40,110 52,351 07 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 Hawaii, as well as supplying his "sticks" (surfer lingo for boards) to other sellers expenses Accounts payable Net fixed assets Sales Accounts receivable Notes payable Long-term debt Inventory New equity 52,015 57,708 254,017 316.82s 400,111 487,712 20,854 27,050 23,708 25,885 128,218 143,971 43,884 60,222 0 24,192 Sunset Boards currently pays out 50 percent of net is ome as dividends to Tad and the other original inves tors, and has a 20 percent tax rate. You are Jamesons assistant, and he has asked you to prepare ollowing 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 creditors require more organized and detailed financial statements than Tad has previously prepared. At the 1. An income statement for 2015 and 2016 urging of his investors, Tad has hired financial analyst 2. A balance sheet for 2015 and 2016 Jameson Reid to evaluate the performance of the cm3. Operating cash flow for each year pany over the past year 4. 5. 6. Cash flow from assets for 2016 Cash flow to creditors for 2016 Cash flow to stockholders for 2016 After rooting through old bank statements, sales re ceipts, tax returns, and other records, Jameson has as sembled the following information QUESTIONS uesti How would you describe Sunset Boards' cash flows for 2016? Write a brief discussion In light of your discussion in the previous que what do you think about Tad's expansion plan 1. 2