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 Assets Cash $35 134 Accounts receivable 200 143 Prepaid insurance 5 3 Inventory 307 186 Buildings and equipment 422 361 Less: Accumulated depreciation -130 -251 839 576 Liabilities Accounts payable 98 122 Accrued liabilities 4 9 Notes payable 61 0 Bonds payable 173 0 Shareholders’ Equity Common stock 411 411 Retained earnings 92 34 839 576 RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) Revenues Sales revenue 2,110 Expenses Cost of goods sold $1,424 Depreciation expense 41 Operating expenses 526 1,991 Net income 119 Additional information from the accounting records: During 2021, $241 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value. 2. In order to maintain the usual policy of paying cash dividends of $61 million, it was necessary for Red to borrow $61 million from its bank. Required: Prepare the statement of cash flows of Red, Inc., using the direct method to report operating activities
Comparative
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RED, INC. |
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2021 |
|
|
Assets |
|
|
|
Cash |
$35 |
134 |
|
|
200 |
143 |
|
Prepaid insurance |
5 |
3 |
|
Inventory |
307 |
186 |
|
Buildings and equipment |
422 |
361 |
|
Less: |
-130 |
-251 |
|
|
839 |
576 |
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Liabilities |
|
|
|
Accounts payable |
98 |
122 |
|
Accrued liabilities |
4 |
9 |
|
Notes payable |
61 |
0 |
|
Bonds payable |
173 |
0 |
|
Shareholders’ Equity |
|
|
|
Common stock |
411 |
411 |
|
|
92 |
34 |
|
|
839 |
576 |
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|
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RED, INC. |
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($ in millions) |
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Revenues |
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Sales revenue |
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2,110 |
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Expenses |
|
|
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Cost of goods sold |
$1,424 |
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Depreciation expense |
41 |
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|
Operating expenses |
526 |
1,991 |
|
Net income |
|
119 |
Additional information from the accounting records:
- During 2021, $241 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $61 million, it was necessary for Red to borrow $61 million from its bank.
Required:
Prepare the statement of
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