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. 2017 9 RED, INC. Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 Assets Cash $ 43 Accounts receivable 196 Prepaid insurance Inventory 302 Buildings and equipment 438 Less: Accumulated depreciation (138) $ 850 Liabilities Accounts payable $ 106 Accrued expenses payable Notes payable 69 Bonds payable Shareholders' Equity Common stock Retained earnings 94 $ 850 $ 138 151 4 194 369 (259) $ 597 $ 138 15 154 419 419 25 $ 597 RED, INC. Statement of Income For Year Ended December 31, 2018 ($ in millions) Revenues Sales revenue Expenses Cost of goods sold $1,471 Depreciation expense 41 Operating expenses _540 Net income $2,190 2,052 $ 138 Additional information from the accounting records: a. During 2018, $249 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $69 million, it was necessary for Red to borrow $69 million from its bank Required: Prepare the statement of cash flows of Red, Inc. using the indirect method to report operating activities. (Amounts RED, INC. Statement of Cash Flows For year ended December 31, 2018 ($ in millions) Cash flows from operating activities: Net income $ 138 Adjustments for noncash effects: Depreciation expense 41 Changes in operating assets and liabilities: Increase in accounts receivable (45) Increase in inventory (108)|| Increase in prepaid insurance (5) Decrease in accounts payable (32) Decrease in accrued expenses payable (18) Net cash flows from operating activities Cash flows from investing activities: Purchase of equipment Sale of equipment Net cash flows from investing activities Cash flows from financing activities: (18) Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 | $ $ (18)