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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, 2821 and 2829 ($ in millions) 2821 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 $ 43 196 9 $1,471 41 548 302 438 (138) $ 850 $ 106 8 69 154 RED, INC. Statement of Income For Year Ended December 31, 2821 ($ in millions) 419 *||| 94 $ 850 $2,190 2,052 $ 138 2828 $ 138 151 4 194 369 (259) $ 597 $ 138 15 8 419 25 $ 597 Additional information from the accounting records: a. During 2021, $249 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 $69 million, it was necessary for Red to borrow $69 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

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, 2821 and 2829 ($ in millions) 2821 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 $ 43 196 9 $1,471 41 548 302 438 (138) $ 850 $ 106 8 69 154 RED, INC. Statement of Income For Year Ended December 31, 2821 ($ in millions) 419 *||| 94 $ 850 $2,190 2,052 $ 138 2828 $ 138 151 4 194 369 (259) $ 597 $ 138 15 8 419 25 $ 597 Additional information from the accounting records: a. During 2021, $249 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 $69 million, it was necessary for Red to borrow $69 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

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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**Exercise 21-31 (Algo) Statement of Cash Flows; Indirect Method** **Overview:** This exercise involves preparing a statement of cash flows for Red, Inc. using the indirect method. The information provided includes comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional accounting records details. --- **Comparative Balance Sheets (December 31, 2021 and 2020)** - **Assets:** - Cash: $43M (2021), $138M (2020) - Accounts Receivable: $196M (2021), $151M (2020) - Prepaid Insurance: $9M (2021), $4M (2020) - Inventory: $362M (2021), $194M (2020) - Buildings and Equipment: $438M (2021), $369M (2020) - Less: Accumulated Depreciation: ($138M, 2021), ($259M, 2020) - **Total Assets:** $856M (2021), $597M (2020) - **Liabilities:** - Accounts Payable: $166M (2021), $138M (2020) - Accrued Liabilities: $8M (2021), $15M (2020) - Notes Payable: $69M (2021), $0 (2020) - Bonds Payable: $154M (2021), $0 (2020) - **Shareholders' Equity:** - Common Stock: $419M (2021 and 2020) - Retained Earnings: $94M (2021), $25M (2020) - **Total Liabilities and Equity:** $856M (2021), $597M (2020) --- **Statement of Income (For Year Ended December 31, 2021)** - **Revenues:** - Sales Revenue: $2,190M - **Expenses:** - Cost of Goods Sold: $1,471M - Depreciation Expense: $41M - Operating Expenses: $540M - **Total Expenses:** $2,052M - **Net Income:** $138M --- **Additional Information:** - In 202
Transcribed Image Text:**Exercise 21-31 (Algo) Statement of Cash Flows; Indirect Method** **Overview:** This exercise involves preparing a statement of cash flows for Red, Inc. using the indirect method. The information provided includes comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional accounting records details. --- **Comparative Balance Sheets (December 31, 2021 and 2020)** - **Assets:** - Cash: $43M (2021), $138M (2020) - Accounts Receivable: $196M (2021), $151M (2020) - Prepaid Insurance: $9M (2021), $4M (2020) - Inventory: $362M (2021), $194M (2020) - Buildings and Equipment: $438M (2021), $369M (2020) - Less: Accumulated Depreciation: ($138M, 2021), ($259M, 2020) - **Total Assets:** $856M (2021), $597M (2020) - **Liabilities:** - Accounts Payable: $166M (2021), $138M (2020) - Accrued Liabilities: $8M (2021), $15M (2020) - Notes Payable: $69M (2021), $0 (2020) - Bonds Payable: $154M (2021), $0 (2020) - **Shareholders' Equity:** - Common Stock: $419M (2021 and 2020) - Retained Earnings: $94M (2021), $25M (2020) - **Total Liabilities and Equity:** $856M (2021), $597M (2020) --- **Statement of Income (For Year Ended December 31, 2021)** - **Revenues:** - Sales Revenue: $2,190M - **Expenses:** - Cost of Goods Sold: $1,471M - Depreciation Expense: $41M - Operating Expenses: $540M - **Total Expenses:** $2,052M - **Net Income:** $138M --- **Additional Information:** - In 202
**RED, INC.** **Statement of Cash Flows** *For the year ended December 31, 2021 ($ in millions)* --- **Cash flows from operating activities:** - [Blank Field] - Adjustments for noncash effects: - [Blank Field] - Changes in operating assets and liabilities: - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from operating activities:** $0 --- **Cash flows from investing activities:** - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from investing activities:** 0 --- **Cash flows from financing activities:** - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from financing activities:** 0 --- - **Net increase (decrease) in cash:** 0 - **Cash balance, January 1:** [Blank Field] **Cash balance, December 31:** $0 --- This statement shows that RED, INC. ended the year with no net cash flow changes, maintaining a balance of $0 on December 31, 2021.
Transcribed Image Text:**RED, INC.** **Statement of Cash Flows** *For the year ended December 31, 2021 ($ in millions)* --- **Cash flows from operating activities:** - [Blank Field] - Adjustments for noncash effects: - [Blank Field] - Changes in operating assets and liabilities: - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from operating activities:** $0 --- **Cash flows from investing activities:** - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from investing activities:** 0 --- **Cash flows from financing activities:** - [Blank Field] - [Blank Field] - [Blank Field] - [Blank Field] **Net cash flows from financing activities:** 0 --- - **Net increase (decrease) in cash:** 0 - **Cash balance, January 1:** [Blank Field] **Cash balance, December 31:** $0 --- This statement shows that RED, INC. ended the year with no net cash flow changes, maintaining a balance of $0 on December 31, 2021.
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