Exercise 21-31 (Static) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8, Appendix 21A] 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 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
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Exercise 21-31 (Static) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8, Appendix 21A]

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:

  1. During 2024, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value.
  2. 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 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).

 
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