Given the Financial Information for the A $\text {A.E. Neuman Corporation }$

Given the financial information for the A.E.Neuman Corporation,
A)Prepare a Statement of Cash Flows for the year ended December 31,2015.
B)What is the dividend payout ratio?
C)If we increased the dividend payout ratio to 100%,what would happen to retained earnings?
$\text {A.E. Neuman Corporation }$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\begin{array}{llcc} \text { ASSETS} &2014&2015 \\ \text {Cash } &\$ 45,000&\$ 50,000\\ \text {Marketable Securities } &175,000&160,000\\ \text {Accounts Receivable } &240,000&220,000\\ \text {Inventories } &230,000&275,000\\ \text {Investments } &\underline{70,000} &\underline{55,000}\\ \text {Total current assets } &\$ 760,000&\$ 760,000\\ \text { Plant and Equipment } &1,300,000&1,550,000 \\ \text { Less Accumulated Amortization } &\underline{450,000}&\underline{600,000}\\ \text {Net Plant and Equipment } &\underline{\$ 850,000}&\underline{\$ 950,000}\\ \text {Total Assets } &\$ 1,610,000&\$ 1,710,000\\\end{array}$
$\begin{array}{l}\text { LIABILITIES AND SHAREHOLDERS' EQUITY }\\\begin{array} { l r r } \text { Accounts Payable } & \$ 110,000 & \$ 85,000 \\\text { Notes Payable } & 65,000 & 10,000 \\\text { Accrued Expenses } & 30,000 & 5,000 \\\text { Income Taxes Payable } & 5,000 & 10,000 \\\text { Bonds Payable (2016) } & 800,000 & 900,000 \\\text { Common Stock (100,000 shares) } & 200,000 & 200,000 \\\text { Retained Earnings } & 400,000 & 500,000 \\\text { Total Liabilities and } & & \\\text { Shareholders' Equity } & \underline{\$ 1.610,000} & \underline{\$ 1.710,000 }\\\end{array}\end{array}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ A.E. Neuman Corporation
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Income Statement
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ For the Year Ended December 31, 2015
$\begin{array}{lr}\text { Sales } & \$ 5,500,000 \\\text { Less: Cost of Goods Sold } & 4,200,000 \\\text { Gross Profit } & 1,300,000 \\\text { Less: Selling, General \& Administrative Expenses } &\underline{ 260,000 }\\ \text { Operating Profit } & 1,040,000 \\\text { Less: Amortization Expense } &\underline{ 150,000 }\\\text { Eamings Before Interest and Taxes } & 890,000 \\\text { Less: Interest Expense } &\underline{ 90,000 }\\\text { Eamings Before Taxes } & 800,000 \\\text { Less: Taxes (50\%) } & \underline{400,000} \\\text { Net Income } &\underline{\underline{ \$ 400,000 }}\\\end{array}$ A) B) $\begin{array} { l } \text { Dividend payout ratio } = \quad \text { Dividends paid, } 2015 \\\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Net Income, } 2015 \\\quad\quad= \frac { \$ 300,000 } { \$ 400,000 } = 0.75 = 75 \% \\\end{array}$ C)The 2015 value for retained earnings would decrease by $100,000.In addition,assets would have to decrease by $100,000 or other liabilities would have to increase by the same amount.