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 $ 35 $ 134 Accounts receivable 200 143 Prepaid insurance 5 3 Inventory 307 186 Buildings and equipment 422 361 Less: Accumulated depreciation (130) (251) $ 839 $ 576 Liabilities Accounts payable $ 98 $ 122 Accrued liabilities 4 9 Notes payable 61 0 Bonds payable 173 0 Shareholders’ Equity Common stock 411 411 Retained earnings 92 34 $ 839 $ 576 RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ in millions) Revenues Sales revenue $ 2,110 Expenses Cost of goods sold $ 1,424 Depreciation expense 41 Operating expenses 526 1,991 Net income $ 119 Additional information from the accounting records: During 2024, $241 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value. In order to maintain the usual policy of paying cash dividends of $61 million, it was necessary for Red to borrow $61 million from its bank. Required: Prepare the statement of cash flows of Red, Incorporated, for the year ended December 31, 2024, using the direct method to report operating activities. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus sign.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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	$ 35	$ 134
Accounts receivable	200	143
Prepaid insurance	5	3
Inventory	307	186
Buildings and equipment	422	361
Less: Accumulated depreciation	(130)	(251)
	$ 839	$ 576
Liabilities
Accounts payable	$ 98	$ 122
Accrued liabilities	4	9
Notes payable	61	0
Bonds payable	173	0
Shareholders’ Equity
Common stock	411	411
Retained earnings	92	34
	$ 839	$ 576

RED, INCORPORATED
Statement of Income
For Year Ended December 31, 2024
($ in millions)
Revenues
Sales revenue		$ 2,110
Expenses
Cost of goods sold	$ 1,424
Depreciation expense	41
Operating expenses	526	1,991
Net income		$ 119

Additional information from the accounting records:

During 2024, $241 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.

In order to maintain the usual policy of paying cash dividends of $61 million, it was necessary for Red to borrow $61 million from its bank.

Required:

Prepare the statement of cash flows of Red, Incorporated, for the year ended December 31, 2024, using the direct method to report operating activities.

Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus sign.

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