Below we reproduce the stockholders’ equity section of the 2019 and 2018 balance sheets for Baker Corporation, which also appear as part of Table 4.5.

a. The Baker Corporation statement of cash flows in Table 4.6 shows a $0 cash inflow resulting from changes in stockholders’ equity, yet the balance sheet shows that stockholders’ equity increased by $100 in 2019. Can you explain this apparent contradiction?
b. Will the statement of cash flows for Baker Corporation show a $0 cash inflow resulting from the change in stockholders’ equity every year, or are other values possible? Explain how Baker’s statement of cash flows could show a positive cash inflow resulting from a change in stockholders’ equity in some future year?

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Account 2019 2018 $ 100 $ 100 Preferred stock Common stock (par) Paid-in capital 120 120 380 380 Retained earnings 600 500 Total stockholders' equity 1,200 1,100 Baker Corporation Statement of Cash Flows ($000) for the Year Ended December 31, 2019 TABLE 4.6 Cash flow from operating activities Net profits after taxes $180 Depreciation 100 Decrease in accounts receivable 100 Decrease in inventories 300 Increase in accounts payable 200 Decrease in accruals -100 Cash provided by operating activities $780 Cash flow from investment activities Increase in gross fixed assets -$300 Changes in equity investments in other firms Cash provided by investment activities -$300 Cash flow from financing activities Decrease in notes payable -$100 Increase in long-term debt 200 Changes in stockholders' equitya Dividends paid (common and preferred) -80 Cash provided by financing activities $ 20 Net increase in cash and marketable securities $500