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 Accounts receivable. Prepaid insurance. Inventory Buildings and equipment Less: Accumulated depreciation Liabilities Accounts payable Accrued liabilities. Notes payable Bonds payable Shareholders' Equity Common stock Retained earnings Revenues. Sales revenue Expenses Cost of goods sold Depreciation expense. Operating expenses Net income $1,444 31 $ 30 190 13 254 455 (125) RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) 486 $ 817 $ 97 12 36 162 406 104 $ 817 $2,080 1,961 $ 119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560 Additional information from the accounting records: a. During 2021, $289 million of equipment was purchased to replace $190 million of equipment (80% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $36 million, it was necessary for Red to borrow $36 million from its bank. Required: Prepare the statement of cash flows for Red, Inc., using the indirect method to report operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting records of Red, Inc., are provided below. RED, INC. Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) 2021 Assets Cash Accounts receivable. Prepaid insurance. Inventory Buildings and equipment Less: Accumulated depreciation Liabilities Accounts payable Accrued liabilities. Notes payable Bonds payable Shareholders' Equity Common stock Retained earnings Revenues. Sales revenue Expenses Cost of goods sold Depreciation expense. Operating expenses Net income $1,444 31 $ 30 190 13 254 455 (125) RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) 486 $ 817 $ 97 12 36 162 406 104 $ 817 $2,080 1,961 $ 119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560 Additional information from the accounting records: a. During 2021, $289 million of equipment was purchased to replace $190 million of equipment (80% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $36 million, it was necessary for Red to borrow $36 million from its bank. Required: Prepare the statement of cash flows for Red, Inc., using the indirect method to report operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting
records of Red, Inc., are provided below.
RED, INC.
Comparative Balance Sheets
December 31, 2021 and 2020 ($ in millions)
2021
Assets
Cash
Accounts receivable.
Prepaid insurance
Inventory
Buildings and equipment
Less: Accumulated depreciation
Liabilities
Accounts payable
Accrued liabilities.
Notes payable
Bonds payable
Shareholders' Equity
Common stock
Retained earnings
Revenues.
Sales revenue
Expenses
Cost of goods sold
Depreciation expense.
Operating expenses
Net income
$1,444
31
$ 30
190
13
254
455
(125)
486
$ 817
RED, INC.
Statement of Income
For Year Ended December 31, 2021
($ in millions)
$ 97
12
36
162
406
104
$ 817
$2,080
1,961
$ 119
2020
$ 122
138
9
181
356
(246)
$ 560
$ 112
21
0
0
406
21
$ 560
Additional information from the accounting records:
a. During 2021, $289 million of equipment was purchased to replace $190 million of equipment (80% depreciated) sold at book value.
b. In order to maintain the usual policy of paying cash dividends of $36 million, it was necessary for Red to borrow $36 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).)
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