Comparative balance sheets for 2016 and 2015, a statement of income for 2016, and additional information from the accounting records of Red, Inc., are provided below.

RED, INC. Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions)
	2016			2015
Assets
Cash	$	32		$	153
Accounts receivable		175			141
Prepaid insurance		9			5
Inventory		300			184
Buildings and equipment		418			359
Less: Accumulated depreciation		(128	)		(249	)
	$	806		$	593
Liabilities
Accounts payable	$	96		$	118
Accrued expenses payable		8			12
Notes payable		59			0
Bonds payable		175			0
Shareholders Equity
Common stock		409			409
Retained earnings		59			54
	$	806		$	593

RED, INC. Statement of Income For Year Ended December 31, 2016 ($ in millions)
Revenues
Sales revenue				$	2,090
Expenses
Cost of goods sold	$	1,361
Depreciation expense		69
Operating expenses		596			2,026
Net income				$	64

Additional information from the accounting records:

a.	During 2016, $259 million of equipment was purchased to replace $200 million of equipment (95% depreciated) sold at book value.

b.	In order to maintain the usual policy of paying cash dividends of $59 million, it was necessary for Red to borrow $59 million from its bank. Required: Prepare the statement of cash flows of Red, Inc. using the direct method to report operating activities.