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.)
|