Exercise 21-27 Statement of cash flows; direct method [LO21-3, 21-5, 21-6, 21-8] 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 RED, INC. Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 2017 Assets Cash Accounts receivable Prepaid insurance Inventory Buildings and equipment Less: Accumulated depreciation $ 32 149 128 140 4 183 358 301 416 (127) (248) $ 779 565 Liabilities Accounts payable Accrued expenses payable Notes payable Bonds payable Shareholders Equity Common stock Retained earnings $ 95 116 12 7 58 170 408 29 $ 779 565 408 RED, INC Statement of Income For Year Ended December 31, 2018 ($ in millions) Revenues Sales revenue Expenses Cost of goods sold $1,457 Depreciation expense Operating expenses Net income $2,060 41 492 1,990 $ 70 Additional information from the accounting records: a. During 2018, $238 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 $58 million, it was necessary for Red to borrow $58 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, 2018 (S in millions) Cash flows from operating activities Cash inflows: Cash outflows: Net cash fows from operating activities Cash flows from investing activities Net cash flows from investing activities Cash flows from financing activities lows from Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31