Question

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) 2020 2021 Assets Cash 44 152 Accounts receivable 198 152 Prepaid insurance Inventory Buildings and equipment Less: Accumulated depreciation 5 12 325 195 440 370 (139) (260) $ 880 614 Liabilities Accounts payable Accrued liabilities Notes payable Bonds payable Shareholders' Equity 107 140 11 16 70 0 181 Common stock 420 420 Retained earnings 91 38 880 $ 614 RED, INC Statement of Income For Year Ended December 31, 2021 ( in millions) Revenues Sales revenue $2,200 Expenses Cost of goods sold Depreciation expense Operating expenses $1,482 50 545 2,077 $ 123 Net income Additional information from the accounting records a. During 2021, $250 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 $70 million, it was necessary for Red to borrow $70 million from its bank

Answer 1

Answer-

RED INC.
STATEMENT OF CASH FLOWS (USING DIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,2021
Particulars		Amount
		$ in millions
Cash flow from operating activities
Cash received from customers	($2200+$152-$198)	2154
Cash paid for operating expenses	($545+$16-$11+$12-$5)	-557
Cash paid for merchandise	($1482+$325-$195+$140-$107)	-1645
Net cash flow from operating activities (a)		-48
Cash Flow from Investing activities
Equipment sold		9
Equipment purchased		-250
Net cash Flow from Investing activities (b)		-241
Cash Flow from Financing activities
Cash dividends paid		-70
Notes payable issued		70
Bonds issued		181
Net cash Flow from Financing activities (c)		181
Net Change in cash c=a+b+c		-108
Beginning cash balance		152
Closing cash balance		44