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Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting records of Red, Inc., are provided
Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting records of Red, Inc., are provided below.
RED, INC. Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) | |||||||
2021 | 2020 | ||||||
Assets | |||||||
Cash | $ | 39 | $ | 95 | |||
Accounts receivable | 228 | 147 | |||||
Prepaid insurance | 10 | 5 | |||||
Inventory | 240 | 201 | |||||
Buildings and equipment | 430 | 375 | |||||
Less: Accumulated depreciation | (134 | ) | (255 | ) | |||
$ | 813 | $ | 568 | ||||
Liabilities | |||||||
Accounts payable | $ | 102 | $ | 130 | |||
Accrued liabilities | 9 | 18 | |||||
Notes payable | 65 | 0 | |||||
Bonds payable | 169 | 0 | |||||
Shareholders Equity | |||||||
Common stock | 415 | 415 | |||||
Retained earnings | 53 | 5 | |||||
$ | 813 | $ | 568 | ||||
RED, INC. Statement of Income For Year Ended December 31, 2021 | ||||||
($ in millions) | ||||||
Revenues | ||||||
Sales revenue | $ | 2,150 | ||||
Expenses | ||||||
Cost of goods sold | $ | 1,445 | ||||
Depreciation expense | 32 | |||||
Operating expenses | 560 | 2,037 | ||||
Net income | $ | 113 | ||||
Additional information from the accounting records:
- During 2021, $235 million of equipment was purchased to replace $180 million of equipment (85% depreciated) sold at book value.
- In order to maintain the usual policy of paying cash dividends of $65 million, it was necessary for Red to borrow $65 million from its bank.
Required: Prepare the statement of cash flows for 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 (i.e., 10,000,000 should be entered as 10).)
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