Question

Exercise 21-31 (Algo) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8] Appendix 21A 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 ($ in millions) 2021 2020 Assets Cash $ 32 $ 153 Accounts receivable 175 141 Prepaid insurance 9 5 Inventory 300 184 Buildings and equipment 418 359 Less: Accumulated depreciation (128 ) (249 ) $ 806 $ 593 Liabilities Accounts payable $ 96 $ 118 Accrued liabilities 8 12 Notes payable 34 0 Bonds payable 175 0 Shareholders’ Equity Common stock 409 409 Retained earnings 84 54 $ 806 $ 593 RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) Revenues Sales revenue $ 2,090 Expenses Cost of goods sold $ 1,361 Depreciation expense 69 Operating expenses 596 2,026 Net income $ 64 Additional information from the accounting records: During 2021, $259 million of equipment was purchased to replace $200 million of equipment (95% depreciated) sold at book value. In order to maintain the usual policy of paying cash dividends of $34 million, it was necessary for Red to borrow $34 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 should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1