Question
Comparative balance sheets for 2013 and 2012, a statement of income for 2013, and additional information from the accounting records of Red, Inc., are provided
Comparative balance sheets for 2013 and 2012, a statement of income for 2013, and additional information from the accounting records of Red, Inc., are provided below. |
RED, INC. Comparative Balance Sheets December 31, 2013 and 2012 ($ in millions) | ||||||
2013 | 2012 | |||||
Assets | ||||||
Cash | $ | 24 | $ | 110 | ||
Accounts receivable | 178 | 132 | ||||
Prepaid insurance | 7 | 3 | ||||
Inventory | 285 | 175 | ||||
Buildings and equipment | 400 | 350 | ||||
Less: Accumulated depreciation | (119 | ) | (240 | ) | ||
$ | 775 | $ | 530 | |||
Liabilities | ||||||
Accounts payable | $ | 87 | $ | 100 | ||
Accrued expenses payable | 6 | 11 | ||||
Notes payable | 50 | 0 | ||||
Bonds payable | 160 | 0 | ||||
Shareholders Equity | ||||||
Common stock | 400 | 400 | ||||
Retained earnings | 72 | 19 | ||||
$ | 775 | $ | 530 | |||
RED, INC. Statement of Income For Year Ended December 31, 2013 ($ in millions) | ||||||
Revenues | ||||||
Sales revenue | $ | 2,000 | ||||
Expenses | ||||||
Cost of goods sold | $ | 1,400 | ||||
Depreciation expense | 50 | |||||
Operating expenses | 447 | 1,897 | ||||
Net income | $ | 103 | ||||
Additional information from the accounting records: |
a. | During 2013, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value. |
b. | In order to maintain the usual policy of paying cash dividends of $50 million, it was necessary for Red to borrow $50 million from its bank.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started