Comparative balance sheets for 2018 and 2017, a statement of income for 2018, and additional information from the accounting records of Red, Inc., are provided below

Red, INC.

Comparative Balance Sheets

December 31, 2018 and 2017 ($ in millions)

20182017

Asset

Cash$.44$152

Accounts receivable198152

Prepaid insurance125

Inventory 325 195

Buildings and equipment 440 370

Less:Accumulated depreciation(139) (260)

$880 $614

Liabilities

Account payable$107$140

Accrued expense payable11 16

Notes payable700

Bonds payable1810

Shareholders' Equity

Common stock420.420

Retained earnings 91 38

$ 880 $ 614

RED, INC.,

Statement of Income

For Year Ended December 31, 2018

($ in millions)

Revenues

Sales revenues$2,200

Expenses

Costs of Goods Sold$1,482

Depreciation expense 50

Operating expenses545 2,077 123

Additional information from the accounting records:

a.During 2018, $250 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 $70 million, it was necessary for Red to borrow $70 million from it bank

the statement of cash flows of Red Inc., using the direct method to repost operating ACTIVIES.

RED, INC. Statement of Cash Flows For year ended December 31, 2018 ($ in millions) Cash flows from operating activities: Cash inflows: Cash outflows: To suppliers of goods Net cash flows from operating activities $ 0 Cash flows from investing activities: Net cash flows from investing activities 0 Cash flows from financing activities: Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 0