Comparative balance sheets for 2024 and 2023, a statement of income for 2024, and additional information from the accounting records of Red, Incorporated, are provided below: RED, INCORPORATED Comparative Balance Sheets December 31, 2024 and 2023 ($ in millions) 2024 2023 Assets Cash $ 29 $ 114 Accounts receivable 188 137 Prepaid insurance 14 6 Inventory 252 180 Buildings and equipment 453 355 Less: Accumulated depreciation (124) (245) $ 812 $ 547 Liabilities Accounts payable $ 95 $ 110 Accrued liabilities 13 20 Notes payable 25 0 Bonds payable 162 0 Shareholders’ Equity Common stock 405 405 Retained earnings 112 12 $ 812 $ 547 RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ in millions) Revenues Sales revenue $ 2,030 Expenses Cost of goods sold $ 1,430 Depreciation expense 41 Operating expenses 434 1,905 Net income $ 125 Additional information from the accounting records: During 2024, $278 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value. In order to maintain the usual policy of paying cash dividends of $25 million, it was necessary for Red to borrow $25 million from its bank. Required: Prepare the statement of cash flows for Red, Incorporated, using the indirect method to report operating activities. Note: Cash outflows should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).

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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Question

Comparative balance sheets for 2024 and 2023, a statement of income for 2024, and additional information from the accounting records of Red, Incorporated, are provided below:

RED, INCORPORATED
Comparative Balance Sheets
December 31, 2024 and 2023 ($ in millions)
	2024	2023
Assets
Cash	$ 29	$ 114
Accounts receivable	188	137
Prepaid insurance	14	6
Inventory	252	180
Buildings and equipment	453	355
Less: Accumulated depreciation	(124)	(245)
	$ 812	$ 547
Liabilities
Accounts payable	$ 95	$ 110
Accrued liabilities	13	20
Notes payable	25	0
Bonds payable	162	0
Shareholders’ Equity
Common stock	405	405
Retained earnings	112	12
	$ 812	$ 547

RED, INCORPORATED
Statement of Income
For Year Ended December 31, 2024
($ in millions)
Revenues
Sales revenue		$ 2,030
Expenses
Cost of goods sold	$ 1,430
Depreciation expense	41
Operating expenses	434	1,905
Net income		$ 125

Additional information from the accounting records:

During 2024, $278 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
In order to maintain the usual policy of paying cash dividends of $25 million, it was necessary for Red to borrow $25 million from its bank.