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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 (s in millions) 2821 $ 30 198 13 254 455 (125) 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 $ 817 RED, INC. Statement of Income For Year Ended December 31, 2021 (s in millions) $1,444 31 486 $97 12 56 162 406 84 $817 $2,080 1,961 $119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560

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 (s in millions) 2821 $ 30 198 13 254 455 (125) 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 $ 817 RED, INC. Statement of Income For Year Ended December 31, 2021 (s in millions) $1,444 31 486 $97 12 56 162 406 84 $817 $2,080 1,961 $119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $56 million, it was necessary for Red to borrow $56 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 (.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, 2021 (5 in millions) Cash flows from operating activities: Cash inflows Cash outflows: Net cash flows from operating activities Cash flows from investing activities: Net cash flows from investing activities Cash flows from financing activities: Issuance of note payable issuance of bonds payable Payment of dividends Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 S $ 10 0 0 0
Transcribed Image Text: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 $56 million, it was necessary for Red to borrow $56 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 (.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, 2021 (5 in millions) Cash flows from operating activities: Cash inflows Cash outflows: Net cash flows from operating activities Cash flows from investing activities: Net cash flows from investing activities Cash flows from financing activities: Issuance of note payable issuance of bonds payable Payment of dividends Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 S $ 10 0 0 0
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 (s in millions) 2821 $ 30 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 31 198 13 254 455 (125) RED, INC. Statement of Income For Year Ended December 31, 2021 (s in millions) 486 $ 817 $97 12 56 162 406 84 $817 $2,080 1,961 $119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560
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 (s in millions) 2821 $ 30 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 31 198 13 254 455 (125) RED, INC. Statement of Income For Year Ended December 31, 2021 (s in millions) 486 $ 817 $97 12 56 162 406 84 $817 $2,080 1,961 $119 2020 $ 122 138 9 181 356 (246) $ 560 $ 112 21 0 0 406 21 $ 560
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