Comparative balance sheets for 2013 and 2012 a statement of

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Reference no: EM13483228

Comparative balance sheets for 2013 and 2012, a statement of income for 2013, and additional information from the accounting records of Red, Inc., are provided below.

RED, INC.
Comparative Balance Sheets
December 31, 2013 and 2012 ($ in millions)

2013 2012
  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 expenses payable
6

11
  Notes payable
50

0
  Bonds payable
160

0
  Shareholders' Equity





  Common stock
400

400
  Retained earnings
72

19








$ 775
$ 530














RED, INC.
Statement of Income
For Year Ended December 31, 2013 ($ 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:
a.

During 2013, $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, Inc. using the direct method to report operating activities.(Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

Reference no: EM13483228

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