Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $ 44.1 $ 164.6 Accounts receivable 143.0 94.0 Prepaid insurance 5.4 2.4 Inventory 298.0 172.0 Buildings and equipment 436.0 370.0 Less: Accumulated depreciation (144.0) (259.0) $ 782.5 $ 544.0 Liabilities Accounts payable $ 95.0 $ 106.5 Accrued liabilities 8.5 15.5 Notes payable 100.0 0.0 Bonds payable 130.0 0.0 Shareholders' Equity Common stock 400.0 400.0 Retained earnings 49.0 22.0 $ 782.5 $ 544.0 RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) Revenues Sales revenue $2,500.0 Expenses Cost of goods sold $1,825.0 Depreciation expense 56.0 Operating expenses 492.0 2,373.0 Net income $ 127.0 Additional information from the accounting records: a. During 2021, $246.0 million of equipment was purchased to replace $180.0 million of equipment (95.0% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $100.0 million, it was necessary for Red to borrow $100.0 million from its bank. Required: Prepare the statement of cash flows (direct method) for Red, Inc. Use the T-account method to assist in your analysis. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Answer is complete but not entirely correct. RED, INC. Statement of Cash Flows For year ended December 31, 2021 ($ in millions) Cash flows from operating activities: Cash inflows: From customers $ 2,451.0 Cash outflows: To suppliers of goods 1,962.5 X For operating expenses 506.8 X $ 4,920.3 Net cash flows from operating activities Cash flows from investing activities: Purchase of equipment Sale of equipment (246.0) 9.0 (237.0) Net cash flows from investing activities Cash flows from financing activities: Issuance of note payable Issuance of bonds payable Payment of dividends 100.0 OO 130.0 (100.0) 130.0 Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 4,813.3 164.6 4,977.9 $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started