Mini-Case: Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards, Inc. is a small company that manufactures and sells surfboards in Malibu. Tad Marks is the founder of the company and 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 provided 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 investors haven't required detailed financial statements from Tad. But thanks to work of mouth among professional surfers, sales have picked up recently and Tad is considering a major expansion. His plans include opening another store in Hawaii, as well as supplying his surfboards to other sellers. Tad's expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more organized and detailed financial statements. After rooting through old bank statements, sales receipts, tax returns, and other records, the following information has been assembled. Sunset Boards, Inc. currently pays out 40% of net income as dividends to Tad and the other original investors, and it has a 21% tax rate. 1. PREPARE INCOME STATEMENTS FOR 2020 AND 2021. Be sure to include the disposition of Net Income at the bottom (to either dividends or Add to Retained Earnings). 2. PREPARE BALANCE SHEETS FOR EACH YEAR, 2020 AND 2021 in separate schedules. Formulas to use in calculations: - Operating Cash Flow = EBIT + depreciation - taxes - Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Changes in NWC - Operating Cash Flow = (EBIT + Depr - Taxes) - Net Capital Spending = (End NFA - Beg NFA + depr ) - Changes in Net Working Capital = (End NWC - Beg NWC) - Cash Flow Erom Assets = Cash Flow to Creditors + Cash Flow to Shareholders - Cash Flow to Creditors = (interest paid - new borrowings) - New borrowings = (End LTD - Beg LTD) - Cash Flow to Shareholders = (Dividends Paid - New Equity Raised) - New Equity Raised =(End Equity-Beg Equity-Additions to RE) - Cash Flow From Assets = Cash Flow to Creditors + Cash Flow to Shareholders - Cash Flow to Creditors = (interest paid new borrowings) - New borrowings =( End LTD Beg LTD ) - Cash Flow to Shareholders = (Dividends Paid - New Equity Raised) - New Equity Raised = (End Equity-Beg Equity-Additions to RE) 3. CALCULATE OPERATING CASH FLOW for each year: - 2020= - 2021= 4. CALCULATE CASH FLOW FROM ASSETS for 2021. 5. CALCULATE CASH FLOW TO CREDITORS for 2021. 6. CALCULATE CASH FLOW TO STOCKHOLDERS for 2021