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 $ 24 Accounts receivable 178 $ 110 132 Prepaid insurance 7 3 Inventory 285 175 Buildings and equipment 400 350 Less: Accumulated depreciation (119) (240) $ 775 $ 530 Liabilities Accounts payable $ 87 $ 100 Common stock Accrued liabilities Notes payable Bonds payable Shareholders' Equity Retained earnings 6 11 50 0 160 0 400 400 72 19 $ 775 $ 530 Revenues RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ in millions) Sales revenue Expenses Cost of goods sold Depreciation expense Operating expenses $ 2,000 $ 1,400 50 447 1,897 $ 103 Net income Additional information from the accounting records: a. During 2024, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $50 million, it was necessary for Red to borrow $50 million from its bank. Required: Prepare the statement of cash flows of Red, Incorporated, for the year ended December 31, 2024, using the direct method to report operating activities. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus sign. RED, INCORPORATED Statement of Cash Flows For year ended December 31, 2024 ($ in millions) Cash flows from operating activities: Cash inflows: Cash outflows: Depreciation expense Net cash flows from operating activities Cash flows from investing activities: Net cash flows from investing activities Cash flows from financing activities: Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 $ 125 46 $ 171 0 0 171 $ 171

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	$ 24	$ 110
Accounts receivable	178	132
Prepaid insurance	7	3
Inventory	285	175
Buildings and equipment	400	350
Less: Accumulated depreciation	(119)	(240)
	$ 775	$ 530
Liabilities
Accounts payable	$ 87	$ 100
Accrued liabilities	6	11
Notes payable	50	0
Bonds payable	160	0
Shareholders’ Equity
Common stock	400	400
Retained earnings	72	19
	$ 775	$ 530

RED, INCORPORATED
Statement of Income
For Year Ended December 31, 2024
($ in millions)
Revenues
Sales revenue		$ 2,000
Expenses
Cost of goods sold	$ 1,400
Depreciation expense	50
Operating expenses	447	1,897
Net income		$ 103

Additional information from the accounting records:

During 2024, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value.
In order to maintain the usual policy of paying cash dividends of $50 million, it was necessary for Red to borrow $50 million from its bank.

Required:

Prepare the statement of cash flows of Red, Incorporated, for the year ended December 31, 2024, using the direct method to report operating activities.

Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus sign.