Overview of PART 1 48 42 QUESTIONS I. How would you describe Sunset Boards's cash flows for 2018? Write a brief discussion. 2. In light of your discussion in the previous question, what do you think about Tad's expansion plans? Sunset Boards currently pays out as dividends to Tad and the other original investors, and it has a 21 percent tax rate. You are Christina's assistant, and she has asked you to prepare the following: I. An income statement for 2017 and 2018. 2 A balance sheet for 2017 and 2018 3. Operating cash flow for each year percent of net income 4 Cash flow from assets for 2018. 5. Cash flow to creditors for 2018 6 Cash flow to stockholders for 2018. MINICASE cash Flows and Financial Statements at Sunset Boards, Inc. Sunset 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 compa- ny'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 After rooting through old bank statements, sales receipts. tax returns, and other records, Christina has assembled the following information: 2018 2017 $322,742 $255,605 Cost of goods sold only for its own store, the investors haven't required detailed Goancial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and Tad is considering a major expansion. His plans include open- ing another surfboard store in Hawaii, as well as supplying his "sticks" (surfer lingo for boards) 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. 55,725 36,884 Cash 81,559 72,158 Depreciation 17,980 15,687 Interest expense 65,610 50,268 Selling and administrative 44,318 26,186 Accounts payable 387,855 Net fixed assets 318,345 611,224 Sales 501,441 33,901 Accounts recelvable 26,136 Naturally, the new investors and creditors require more orga- nized and detailed financial statements than Tad has previously prepared. At the urging of his investors, Tad has hired finan- cial analyst Christina Wolfe to evaluate the performance of the 32,441 Notes payable 29,712 175,340 Long-term debt 160,689 67,674 Inventory New equity 50,318 19,500 C company over the past year