Exercise 21-31 (Static) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8, Appendix 21A] 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 $ 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 liabilities 6 11 Notes payable 50 0 Bonds payable 160 0 Shareholders’ Equity Common stock 400 400 Retained earnings 72 19 $ 775 $ 530 RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ 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: During 2024, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value. 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 for Red, Incorporated, using the indirect method to report operating activities. Note: Cash outflows should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter21: The Statement Of Cash Flows

Section: Chapter Questions

Problem 14P: (Appendix 21.1) Operating Cash Flows Refer to the information for Lamberson Company in P21-6....

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Exercise 21-31 (Static) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8, Appendix 21A]

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	$ 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 liabilities	6	11
Notes payable	50	0
Bonds payable	160	0
Shareholders’ Equity
Common stock	400	400
Retained earnings	72	19
	$ 775	$ 530

RED, INCORPORATED
Statement of Income
For Year Ended December 31, 2024
($ 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:

During 2024, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value.
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.