In: Accounting
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) |
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2021 | 2020 | ||||||
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 liabilities | 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, 2021 |
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($ 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:
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-
RED INC. | ||
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD) | ||
FOR THE YEAR ENDED, DECEMBER 31,2021 | ||
Particulars | Amount | |
$ in millions | ||
Cash flow from operating activities | ||
Net Income | 106 | |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Adjustment for non cash effects | ||
Depreciation | 41 | |
Change in operating assets & liabilities | ||
Increase in accounts receivable | -47 | |
Increase in inventory | -111 | |
Increase in prepaid insurance | -4 | |
Decrease in accounts payable | -14 | |
Decrease in accrued liabilities | -6 | |
Net cash flow from operating activities (a) | -35 | |
Cash Flow from Investing activities | ||
Cash paid for equipment | -231 | |
Old equipmnet sold | 18 | |
Net cash flow (used for) Investing activities (b) | -213 | |
Cash Flow from Financing activities | ||
Notes payable issued | 51 | |
Bonds payable issued | 161 | |
Cash paid for dividends | -51 | |
Net cash flow (used for) Financing activities (c) | 161 | |
Net Change in cash c=a+b+c | -87 | |
Cash at the beginning of the year | 112 | |
Cash at the end of the year | 25 |