Question

Comparative balance sheets for 2018 and 2017, a statement of income for 2018, and additional information from the accounting records of Red, Inc., are provided below.

RED, INC. Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions)
	2018				2017
Assets
Cash	$	25			$	112
Accounts receivable		180				133
Prepaid insurance		8				4
Inventory		287				176
Buildings and equipment		402				351
Less: Accumulated depreciation		(120	)			(241	)
	$	782			$	535
Liabilities
Accounts payable	$	88			$	102
Accrued expenses payable		7				13
Notes payable		51				0
Bonds payable		161				0
Shareholders’ Equity
Common stock		401				401
Retained earnings		74				19
	$	782			$	535

RED, INC. Statement of Income For Year Ended December 31, 2018
($ in millions)
Revenues
Sales revenue				$	2,010
Expenses
Cost of goods sold	$	1,414
Depreciation expense		41
Operating expenses		449			1,904
Net income				$	106

Additional information from the accounting records:

1. During 2018, $231 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $51 million, it was necessary for Red to borrow $51 million from its bank.

Required:
Prepare the statement of cash flows of 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