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) 2018 2017 Assets Cash $ 37 $ 136 Accounts receivable 220 135 Prepaid insurance 12 5 Inventory 291 178 Buildings and equipment 386 353 Less: Accumulated depreciation (122) (243) $ 824 $ 564 Liabilities Accounts payable $ 90 $ 106 Accrued expenses payable 11 13 Notes payable 73 Bonds payable 210 0 Shareholders' Equity Common stock 403 403 Retained earnings 37 42 $ 824 $ 564 RED, INC. Statement of Income For Year Ended December 31, 2018 ($ in millions) Revenues Sales revenue $2,020 Expenses Cost of goods sold $1,412 Depreciation expense 69 Operating expenses 471 1,952 Net income $ 68 RED, INC. Statement of Income For Year Ended December 31, 2018 ($ in millions) Revenues Sales revenue $2,020 Expenses Cost of goods sold $1,412 Depreciation expense 69 Operating expenses 471 1,952 Net income 68 Additional information from the accounting records: a. During 2018, $233 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 $73 million, it was necessary for Red to borrow $73 million from its bank. Required: Prepare the statement of cash flows of Red, Inc. using the indirect method to report operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (ie., 10,000,000 should be entered as 10).) RED, INC. Statement of Cash Flows For year ended December 31, 2018 ($ in millions) Cash flows from operating activities: Adjustments for noncash effects: Changes in operating assets and liabilties: should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) RED, INC. Statement of Cash Flows For year ended December 31, 2018 ($ in millions) Cash flows from operating activities: Adjustments for noncash effects: Changes in operating assets and liabilities: $ 0 Decrease in accounts payable Decrease in accrued expenses payable Depreciation expense Increase in accounts receivable Increase in inventory Net cash flows from investing activities Cash flows from financing activities: 0 Not cash flows from financing activities 0 Changes in operating assets and liabilities: Net cash flows from operating activities $ 0 Decrease in accounts payable Decrease in accrued expenses payable Depreciation expense ces 0 0 Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 0 $ 0
