Exercise 21-31 (Algo) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8] Appendix 21A

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	$	36			$	142
Accounts receivable		209				144
Prepaid insurance		12				8
Inventory		260				187
Buildings and equipment		424				362
Less: Accumulated depreciation		(131	)			(252	)
	$	810			$	591
Liabilities
Accounts payable	$	99			$	124
Accrued liabilities		11				14
Notes payable		62				0
Bonds payable		147				0
Shareholders Equity
Common stock		412				412
Retained earnings		79				41
	$	810			$	591

RED, INC. Statement of Income For Year Ended December 31, 2021
($ in millions)
Revenues
Sales revenue				$	2,200
Expenses
Cost of goods sold	$	1,528
Depreciation expense		47
Operating expenses		525			2,100
Net income				$	100

Additional information from the accounting records:

1. During 2021, $272 million of equipment was purchased to replace $210 million of equipment (80% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $62 million, it was necessary for Red to borrow $62 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).)

RED, INC.
Statement of Cash Flows
For year ended December 31, 2021 ($ in millions)
Cash flows from operating activities:
Net income
Adjustments for noncash effects:
Depreciation expense
Changes in operating assets and liabilities:
Increase in accounts receivable
Increase in prepaid insurance
Increase in inventory
Decrease in accounts payable
Decrease in accrued liabilities
Net cash flows from operating activities		$0
Cash flows from investing activities:
Sale of equipment
Purchase of equipment
Net cash flows from investing activities		0
Cash flows from financing activities:
Payment of dividends
Issuance of note payable
Issuance of bonds payable
Net cash flows from financing activities		0
Net increase (decrease) in cash		0
Cash balance, January 1
Cash balance, December 31		$0