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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
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) Assets Cash Accounts receivable Prepaid insurance Inventory Buildings and equipment Less: Accumulated depreciation Liabilities Accounts payable Accrued liabilities Notes payable Bonds payable Common stock Shareholders' Equity Retained earnings 2021 2020 $ 24 178 $ 110 132 7 3 285 175 400 350 (119) (240) $ 775 $ 530 $ 87 $ 100 6 11 50 0 160 0 400 400 72 19 $ 775 $ 530 RED, INC. Statement of Income For Year Ended December 31, 2021 Revenues ($ in millions) Sales revenue $2,000 Expenses Cost of goods sold $1,400 Depreciation expense Operating expenses 50 447 1,897 Net income $ 103 Additional information from the accounting records: a. During 2021, $230 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 $50 million, it was necessary for Red to borrow $50 million from its bank.
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