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 $ 34 $ 121 Accounts receivable 180 142 Prepaid insurance 12 6 Inventory 250 185 Buildings and equipment 420 360 Less: Accumulated depreciation (129) (250) $ 767 $ 564 Liabilities Accounts payable $ 97 $ 120 Accrued liabilities 11 14 Notes payable 60 0 Bonds payable 121 0 Shareholders' Equity Common stock 410 410 Retained earnings 68 20 $ 767 $ 564 $ RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) Revenues Sales revenue $2,100 Expenses Cost of goods sold $1,400 Depreciation expense 41 Operating expenses 551 1,992 Net income $ 108 Additional information from the accounting records: a. During 2021, $240 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 $60 million, it was necessary for Red to borrow $60 million from its bank. Required: Prepare the statement of cash flows of Red, Inc., using the direct method to report operating activities. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.) RED, INC. Statement of Cash Flows For year ended December 31, 2021 ($ in millions) Cash flows from operating activities: Cash inflows: From customers Cash outflows: To suppliers of goods For operating expenses 0 Net cash flows from operating activities Cash flows from investing activities: Purchase of equipment Sale of equipment 0 Net cash flows from investing activities Cash flows from financing activities: Issuance of note payable Issuance of bonds payable Payment of dividends 0 Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 0 (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.) RED, INC. Statement of Cash Flows For year ended December 31, 2021 (S in millions) Cash flows from operating activities: Cash inflows: From customers Cash outflows: To suppliers of goods For operating expenses $ 0 Net cash flows from operating activities Cash flows from investing activities: Purchase of equipment Sale of equipment 0 Net cash flows from investing activities Cash flows from financing activities: Issuance of note payable Issuance of bonds payable Payment of dividends 0 0 Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 $ 0
